ERC VDP Update as of Aug. 15, 2024

If you missed the March deadline to withdraw a Employee Retention Credit claim, you’re in luck: The IRS extended the deadline to November. 

Through the agency’s Voluntary Disclosure Program, businesses can correct wrong ERC payments at a 15% percent discount and save themselves the headaches of a future audit until Nov. 22, 2024.

That’s down from the 20% discount offered in March. But it still means approved applicants will only need to repay 85% of the credits they received.

The IRS also said it’ll mail as many as 30,000 new letters to try to get back more than a billion dollars in bad ERC claims.

According to the agency, during the VDP’s first round, there were more than 2,600 applications disclosing $1.09 billion worth of credits. Oof.

ERC question? Let us know.

ERC VDP Update as of Feb. 7, 2024

On the last episode of “As the Employee Retention Credit Turns,” we wrote about what to do if your business needs to withdraw an ERC claim. Well, there’s been an update (plot twist?), and it has an expiration date: March 22, 2024.

Here’s what we know: The IRS is cracking down on bad ERC claims. So, the agency created the Voluntary Disclosure Program, which allows employers — who might have been swindled by an ERC promoter and claimed an ERC refund they weren’t actually eligible for — to send the credit back penalty-free.

The VDR allows employers to repay the invalid ERC claim at a reduced rate of 80%. The employer gets to keep the 20%, which is non-taxable. The program waives all penalties and interest on the ERC claim. If the employer can’t pay back 80% right away, they can go into an installment agreement.

The employer also has to:

  • Cooperate with any requests from the IRS for more information, and
  • Sign a closing agreement.

In addition to the requirements mentioned above, employers must also report the third-party company that made the ERC claim.

If you’re an employer with a bad ERC claim, you’re not eligible for VDR if any of the following apply:

  • You’re under criminal investigation or have been notified that the IRS intends to commence a criminal investigation.
  • The IRS has already received information alerting it about your noncompliance.
  • You’re undergoing an employment tax examination for the period for which you’re applying.
  • You’ve already received a notice and demand to repay all or part of the ERC you claimed.

Something else to keep in mind: If the proposed Tax Relief for American Families and Workers Act of 2024 is signed into law as it’s currently written, all ERC claims will end effective Jan. 31, 2024.

If you have ERC questions, let us know.