What happened?

On August 15, 2024, the Internal Revenue Service announced a limited time reopening of the Voluntary Disclosure Program to help businesses fix incorrect Employee Retention Credit (ERC) claims as the agency continues compliance work.

What are the details?

As Vensure previously reported, on December 21, 2023, the IRS launched a Voluntary Disclosure Program allowing employers to pay back 80% of the credit received via an Employee Retention Credit (ERC) claim because a lot of employers were misled into filing ERC claims due to an aggressive marketing campaign. This was the first repayment program the IRS launched, which ended in March.

This year, on August 15, 2024, the IRS reopened the Voluntary Disclosure Program and allows businesses a chance to correct improper payments at a 15% discount and avoid future audits, penalties, and interest.

The IRS urges businesses that filed ERC claims to review them according to the 5+ warning signs of an Incorrect ERC Claim, which are:

• Essential businesses during the pandemic that could fully operate and didn’t have a decline in gross receipts.
• Businesses unable to support how a government order fully or partially suspended business operations.
• Businesses reporting family members’ wages as qualified wages. 
• Businesses using wages already used for Paycheck Protection Program loan forgiveness. 
• Large employers claiming wages for employees who provided services.

For employers with pending, unpaid ERC Claims, the IRS urges businesses to consider a separate ERC Claim Withdrawal Program that allows them to remove a pending ERC claim

Business Considerations

• Employers should review the resources provided by the IRS on the 5+ warning signs of an incorrect IRC Claim, and consider taking advantage of the reopening of this program.
• In case the claim is pending and unpaid, employers should consider the separate ERC Claim Withdrawal program from the IRS.
• If an employer considers that he is entitled to an ERC claim but does not know how to proceed, seek counsel from a tax professional for further assistance.

Source References

• IRS Announcement August 15, 2024
• IRS Launches Temporary Voluntary Disclosure Program So Employers Can Avoid Penalties (VensureHR)
• IRS is Reopening Voluntary Disclosure Program for Improper ERC Claim (Firmworks, LLC.)
• IRS Issues Updated FAQs on the Voluntary Disclosure Practice (VDP) (Brown Tax, P.C.)

Resources

• IRS 5+ Warning Signs of Incorrect ERC Claim
• IRS FAQs on Voluntary Disclosure Practice

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