IRS Announces Employee Retention Credit Voluntary Disclosure Program
On December 21, 2023, the Internal Revenue Service (“IRS”) unveiled details concerning the Employee Retention Credit Voluntary Disclosure Program (“ERC-VDP”). This program is aimed at taxpayers who mistakenly claimed and received Employee Retention Credit (“ERC”) refunds for specific quarters when they were not eligible. (Previous ERC withdrawal relief only applied to taxpayers who had not received the ERC funds, or who had not deposited the ERC checks).
Under the current ERC-VDP, taxpayers can repay the ERC funds received to avoid penalties and interest. Only 80% of the amount received is required to be repaid; the reduced repayment rate is meant to alleviate the financial burden on taxpayers who paid a contingency fee to promoters of ERC filings. The ERC-VDP also offers relief from penalties and interest on the entire ERC amount, not only the 80% returned.
Applications for the ERC-VDP will be accepted until March 22, 2024. Applicants approved for participation must sign a closing agreement acknowledging their ineligibility for the ERC and provide information about any tax preparers or advisors who assisted in claiming the credit. The IRS has released a set of Frequently Asked Questions related to the ERC-VDP to assist with various questions.
In addition to the ERC-VDP, the IRS announced that it has started issuing another round of 20,000 letters with proposed tax adjustments to recapture incorrect or dubious 2020 ERC claims while work continues for the 2021 tax year. This is in addition to the 20,000 letters already being sent out and thousands of claims referred for audit.
- The taxpayer is under criminal investigation or has been notified that it is under criminal investigation;
- The taxpayer is undergoing an IRS employment tax examination for the tax period(s) in which it is applying to the ERC-VDP;
- The taxpayer received a notice and demand for repayment of all or part of the ERC; or
- The IRS already received information that the taxpayer is not in compliance.
- executing a closing agreement,
- confirming ineligibility for ERC during the relevant tax period(s), and
- repaying 80% of the claimed ERC to the Department of Treasury.
If there are any questions or further assistance is needed, BMF Advisors are available for support.
Nathan A. Lieb?>
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