With the recent moratorium on processing new Employee Retention Credit (ERC) claims through at least the end of 2023, questions regarding the validity of claims that were previously filed began to rise.
In an effort to ease taxpayers’ worries and combat suspect ERC claims, the Internal Revenue Service (IRS) launched a new Voluntary Disclosure Program on December 21, 2023. The program is aimed at helping businesses that may have been victims of erroneous ERC claims pay back the money they received.
Who can apply?
Any employer that already received the ERC for a tax period can apply if it meets the following criteria:
- The employer is not currently under a criminal investigation, nor has it been notified of an intended criminal investigation;
- The employer is not under an employment tax examination by the IRS for the tax period(s) for which it is applying to the Voluntary Disclosure Program;
- The employer has not previously received notice and demand from the IRS for repayment of part of all of the ERC; and
- The IRS has not received information from a third party alerting it to the employer’s noncompliance, nor has the IRS acquired information directly related to the noncompliance from an enforcement action.
Additionally, to qualify for this program, employers must provide the IRS with the names, addresses and telephone numbers of any advisor or tax preparer who advised or assisted them with their claim.
How to apply?
To apply, interested employers must use the IRS Document Upload Tool | Internal Revenue Service to first file Form 15434 (About Form 15434, Application for Employee Retention Credit (ERC) Voluntary Disclosure Program | Internal Revenue Service (irs.gov), Application for Employee Retention Credit Voluntary Disclosure Program by March 22, 2024. Those employers whose applications are accepted by the IRS must then repay 80% of the claim they received. Through the Voluntary Disclosure Program, employers are able to keep 20% of the claim they received in addition to any interest the IRS paid on the employer’s ERC claim. The IRS noted that it selected the 80% repayment due to many ERC promotors charging a percentage fee that was collected in advance of receiving the claim payment.
Employers that are unable to repay the full 80% of the credit received may request an installment agreement with the IRS. Installment agreements are considered on a case-by-case basis, pending submission and review of Form 433-B (OIC) (Rev. 4-2023) Collection Information Statement for Businesses and are subject to all penalties and interest that may apply. The IRS encourages employers to consider obtaining a loan from a financial institution, as it may be more financially feasible than entering into an installment agreement.
IRS Reminder
As the agency continues intensifying audits and criminal investigation work in this area, the IRS continues to urge employers with pending ERC claims to consider a separate withdrawal program that allows them to remove a pending ERC claim with no interest or penalty. Claims that are withdrawn will be treated as if they were never filed.
The complete release from the IRS surrounding the Voluntary Disclosure Program can be found at Announcement 2024-3: Employee Retention Credit Voluntary Disclosure Program (irs.gov)
As further guidance is issued, our Credits & Incentives team will continue to monitor the situation and provide updates. If you have any questions, please reach out to your Schneider Downs contact(s) or Matthew Werner at [email protected].
About Schneider Downs Tax Services
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