The New IRS ERC Voluntary Disclosure Program

The IRS ERC Voluntary Disclosure Program provides a special resolution opportunity for employers with erroneous or excessive ERC claims. The IRS recognizes that many erroneous or excessive ERC claims are partly due to aggressive marketing around ERC and promotors who may be collecting a percentage fee. Many exploited taxpayers may wish to correct their errors but are concerned about their ability to pay back the portion of the credit that has been paid to the ERC promoter. For this reason, if accepted into the program, the taxpayer will only be required to repay 80% of the credit they received.

To qualify for this program, the employer must provide the IRS with the names, addresses, and telephone numbers of advisors or tax preparers who advised or assisted them with their claim and details about the services provided. It is believed that the IRS will investigate/prosecute fraudulent ERC advisors.

Benefits of the Voluntary Disclosure Program

Eligible businesses must apply to the ERC Voluntary Disclosure Program by March 22, 2024. By participating in the program, employers can resolve civil tax liabilities and avoid potential civil litigation, penalties & interest. Under the ERC VDP, if the IRS paid interest on the employer’s ERC refund claim, the employer is not required to repay that interest. Employers who cannot repay 80% of the credit may be considered for an installment agreement on a case-by-case basis, pending submission and review of Form 433-B. The IRS will not charge program participants interest or penalties on any credits they repay when signing their closing agreement. However, suppose the employer cannot repay the required 80% of the credit when signing their closing agreement. In that case, the employer must pay penalties and interest when entering an installment agreement. In some cases, it may be advisable for the taxpayer to obtain a loan from a financial institution to avoid interest and penalties related to the installment agreement.

Who Can Apply?

Any employer who already received the ERC for a tax period but isn’t entitled to it can apply if the following are also true:

• The employer is not under criminal investigation and has not been notified that they are under criminal investigation.
• The employer is not under an IRS employment tax examination for the period for which they apply to the Voluntary Disclosure Program.
• The employer has not received an IRS notice and demand to repay part or all of the ERC.
• The IRS has not received information from a third party that the taxpayer is not in compliance or has not acquired information directly related to the noncompliance from an enforcement action.

What To Do Now

It is essential for employers who have submitted ERC claims to know if they truly qualify. Employers who are unsure if they are eligible can review the ERC Eligibility Checklist via the IRS.gov website or consult legal counsel to help determine if they were eligible upon application.

To apply, the employer must file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, available on IRS.gov. This form must be submitted using the IRS Document Upload Tool. Form 15434 must be filled out under penalties of perjury and include the following:

• Taxpayers’ names, taxpayer identification numbers, current addresses, and contact information.
• Tax periods for ERC claims, forms used, and total ERC claimed (refundable or non-refundable)
• For tax periods ending in 2020, Form SS-10, “Consent to Extend the Time to Assess Employment Taxes,” is required.
• Third-party payers must attach Schedule R (Form 941) related to ERC claims.
• If a preparer or advisor assisted with the claim, their information and services description should be included.

Once the employer has applied to the program and submitted their Form 15434, an IRS employee will contact them to review the application and answer any questions.

Employers who outsource their payroll obligations must apply through the third-party payroll processor. See Form 15434 instructions for additional details. If the IRS approves the employer’s application, they will mail the employer a closing agreement. The employer must repay 80% of the ERC they received online or by phone using the Electronic Federal Tax Payment System (EFTPS). EFTPS is the Treasury Department system that most businesses use to pay various federal tax obligations. Once payment is made, the employer must return the signed closing agreement to the IRS.

What To Do if Your ERC Claim is Still Pending

The IRS continues to accept and process requests to withdraw an employer’s entire ERC claim under the special withdrawal process. This withdrawal option allows certain employers who filed an ERC claim but have not received a refund to withdraw their submission.

Conclusion

The disclosure program encourages taxpayers to accept a settlement without significant repercussions. The IRS encourages taxpayers to take advantage of this program if they believe they qualify to minimize risk. They advise that the 80% repayment figure will be more generous than later IRS action related to fraudulent claims. The enactment of this program accentuates the seriousness with which the IRS views the protection of government funds and the ERC program’s integrity.

Help

Navigating the ERC program and potential IRS audits can be complex and challenging. Our law firm has expertise in handling complex IRS ERC issues.

Patel Law Offices offers a strategy session to discuss how to resolve your legal problem. Conveniently schedule online today with our online scheduler and questionnaire.