IRS Offers Voluntary Disclosure on ERC
IRS OFFERS NEW BENEFIT FOR BUSINESSES THAT VOLUNTARILY RETURN WRONGLY CLAIMED EMPLOYEE TAX CREDIT
The Internal Revenue Service (IRS), has instituted the Employee Retention Credit Voluntary Disclosure Program (ERC-VDP). The ERC-VDP is a civil settlement program that lets employers who wrongly received funds from the Employee Retention Credit to pay back the funds at a discounted rate. See the Tennessee Tax Law Blog [provide link] for information outlining the Employee Retention Credit. Applications to the ERC-VDP must be submitted by March 22, 2024.
What is the Benefit of Participating in the ERC-VDP?
The IRS has initiated the ERC-VDP to incentivize recipients of the Employee Retention Credit to pay back wrongly claimed funds. The IRS will consider the credit fully repaid if the participant pays back 80% of the funds they received. A participant of the ERC-VDP who completes the program will not be subject to an employment tax audit for the Employee Retention Credit by the IRS. However, for those who wrongly claimed the Employee Retention Credit and do not participate in the ERC-VDP, then the IRS will continue to pursue recovery of those funds, and those taxpayers may be subject to substantial interest and penalties that may increase one’s risk of criminal prosecution.
What does a Participant Need to do to Benefit from the ERC-VDP?
A participant of ERC-VDP will be required to formally apply to the ERC-VDP program using Form 15434. This form may be found online on the IRS’s website. In addition, one must cooperate with the IRS after the application is sent in, such as complying with any requests for more information. Some additional forms may be needed given certain circumstances. A participant must voluntarily pay back 80% of the Employee Retention Credit received. No less than 80% may be paid for full participation to be considered. The IRS views this 80% payment as fully paying the Employee Retention Credit with a 20% deduction, as discussed above. Finally, a participant must sign a closing agreement with the IRS. Upon signing the closing agreement, the IRS will consider the participant's responsibility to pay the Employee Retention Credit complete.
We Can Help.
Tennessee Tax Law can help. We can walk you and your business through the complex process of participating in the ERC-VDP and communicating with the IRS. We are here to help guide you and your business as you make decisions regarding your business and employees. For whatever issues your business is facing, please allow Tennessee Tax Law to assist you.