Feb 06, 2024

Two Pivotal IRS Programs Launched to Address Employee Retention Credit (ERC) Issues

In response to the increasing number of potentially ineligible Employee Retention Credit (ERC) claims, the IRS has recently launched two pivotal programs for businesses navigating the complexities of the ERC: the ERC claim withdrawal option and the Voluntary Disclosure Program (ERC-VDP).

The withdrawal option is a direct response to the increasing concerns over the legitimacy of numerous ERC claims, exacerbated by aggressive marketing practices. This program allows businesses to retract their pending ERC claims without incurring any penalties or interest, provided these claims were filed through adjusted employment returns specifically for the ERC. This initiative is particularly relevant in the context of the proposed Tax Relief for American Families and Workers Act of 2024 that moved the deadline for new ERC claims to last Wednesday, January 31, 2024.

The ERC-VDP aims to assist businesses that erroneously claimed and received the ERC and will be available for businesses through March 22, 2024. Participants in this program are required to repay 80% of the erroneously claimed credit, cooperate with IRS information requests, and sign a closing agreement.

Advantages are significant for participating in the Voluntary Disclosure Program and include:

  • absolution from penalties and interest on the misclaimed amounts if repaid during the agreement process,
  • relief from the obligation of amending income tax returns to correct wage expenses, and
  • a safeguard against IRS employment tax return examinations for the periods addressed by the ERC-VDP.

Both programs reflect a concerted effort by the IRS to provide a constructive resolution path for businesses entangled in ERC claim inaccuracies, fostering a more transparent and compliant environment.

If your ERC claim was prepared by someone other than BMSS and you believe it could be in error or would like additional information, please do not hesitate to contact us or call our office at (833) CPA-BMSS.