Tax Blog/Blawg

Background:

Millions of Employee Retention Credit (ERC) claims have been filed with the IRS as a result of the COVID-19 pandemic, with millions of taxpayers already receiving their refunds and others still waiting to receive refund checks. The IRS audits and Appeals work has commenced with a fury at a dizzying pace. While many appropriate ERC claims have been filed, the IRS has seen a number of erroneous claims as well. On December 21st, the IRS launched a new initiative to address the issue of erroneous ERC claims. The Voluntary Disclosure Program, part of a broader IRS effort to combat these issues, will be operational until March 22, 2024. It offers an opportunity for eligible businesses to address their potentially erroneous ERC claims by repaying only 80% of the credit amount received.

Key Highlights of the ERC Voluntary Disclosure Program:

• Deadline for Application: Eligible businesses have until March 22, 2024, to apply for the ERC Voluntary Disclosure Program.
• Repayment Terms: Accepted businesses are only required to repay 80% of the ERC amount they received. The 80% repayment is not required to be repaid until closing.
• Interest Exemption: Businesses are not required to repay any interest received on their ERC refund claims.
• No Requirement To Amend for Wage Expense: Businesses that are accepted into the Voluntary Disclosure Program are not required to amend their income tax returns to reduce their wage expense.  
• Installment Agreements: Businesses facing difficulties in repaying the full 80% can seek an installment agreement, subject to review and acceptance of Form 433-B.

Important Notes:

• No Penalties or Interest: Participants repaying the credit under the program's terms will not incur additional interest or penalties.
• Installment Agreement Considerations: Businesses opting for an installment agreement to repay the 80% may face standard penalties and interest.

Eligibility Criteria for Application:

To be eligible for the program, businesses must:

• Not be under any criminal investigation or have been notified of such by the IRS.
• Not be under an IRS employment tax examination for the relevant period.
• Not have received a notice or demand for repayment of the ERC.
• Not have any third-party or enforcement action for reported noncompliance.

Additionally, applicants must provide certain details regarding any advisors or tax preparers involved in their ERC claims, as outlined in IRS Announcement 2024-3.

Application Process:

• Form Submission: Complete and submit Form 15434 via the IRS Document Upload Tool. Third-party payroll processors must file this form on behalf of employers.
• IRS Guidance and FAQs: Consult the IRS FAQs for detailed information and guidance.

Post-Approval Steps:

Upon approval, the IRS will issue a closing agreement. Payment options include online or phone transactions through EFTPS. Employers considering installment agreements should be aware of potential penalties and interest charges going forward. 

We urge you to carefully evaluate your position regarding this program and we stand ready to provide any needed assistance or clarification. Chamberlain Hrdlicka has many tax law specialists who have counseled many clients regarding ERC, and have vast knowledge and experience navigating prior IRS Voluntary Disclosure Programs and Settlement Initiatives.