The IRS has reminded employers that March 22, 2024, is the deadline for the IRS’ Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP). Employers should review their employment tax returns (Forms 941) for questionable claims to avoid future problems. (IR 2024-72, 3/15/2024)
Voluntary disclosure program.
To help those employers who were misled by aggressive promoters, the IRS is allowing employers to correct improper ERC claims at a discount, penalty and interest free, but only for a limited time, through a voluntary disclosure program. This VDP closes March 22.
The IRS notes that employers that can’t repay the ERC they received in full can still apply to the VDP and request an installment agreement.
Employers seeking an installment agreement will need to submit Form 433-B, Collection Information Statement for Businesses and any required documents with their VDP application by March 22.
These employers also may need to sign Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty.
See Payment options for accepted ERC-VDP applications for details.
Claim withdrawal process.
Certain employers that don’t want to participate in the VDP may be able to pursue the claim withdrawal process. Under the claim withdrawal process, the employer asks the IRS not to process an ERC claim for any tax period that hasn’t been paid yet. Employers who received an ERC check but haven’t cashed or deposited it can also use the claim withdrawal process to withdraw their ERC claim and return the check. If the IRS agrees to the employer withdrawing their claim, it will treat the claim as though the employer never filed it and no interest or penalties will apply.
What happens to nonparticipants?
Employers with incorrect ERC claims who don’t participate in the VDP or withdraw their incorrect claims, may be liable for the total amount of their incorrect ERC plus penalties and interest computed from the date the employer received the ERC. The interest compounds daily and the penalties accrue monthly and, generally, cap out at 25%.
“The window of opportunity is closing for those with questionable claims to fix things before they receive follow-up compliance action,” said IRS Commissioner Danny Werfel. “We strongly urge businesses to review the Employee Retention Credit guidelines immediately before a key disclosure program closes, especially if they encountered a high-pressure push to apply for these credits.”
Processing updates.
The IRS continues to process ERC claims submitted before the moratorium announced on September 14, 2023. These claims are being processed with increased scrutiny and, thus, more slowly. The IRS has not announced a date to resume r processing of claims filed after September 14, 2023.
For more information about the IRS’ ERC Voluntary Disclosure Program (ERC-VDP), see Checkpoint’s Federal Tax Coordinator ¶ T-10164.11.
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