Recently, the IRS initiated a few additional activities companies should be aware of regarding the Employee Retention Credit (ERC). This article addresses the significant ones.
Voluntary Disclosure Program
On August 15, 2024, the IRS announced a second voluntary disclosure agreement (VDA) program for taxpayers who had filed an ERC claim for any quarter in 2021. Most taxpayers who have used a trusted tax professional may not need to participate in the VDA program.
If a taxpayer believes it was not eligible to have claimed the ERC and wishes to pay back the amounts received to the IRS, it may want to consider participation in the VDA program, as it does have some advantages to just amending the approved ERC claim. This new VDA program allows the taxpayer to repay 85% of the ERC amount. A taxpayer would not be required to repay any interest received and will not be charged any penalties or interest on the amount repaid.
Taxpayers must meet all of the following requirements to participate in the VDA program:
- The ERC claim has been processed and paid.
- The taxpayer believes they are entitled to none of the claimed ERC amount.
- The taxpayer is not under audit or criminal investigation by the IRS regarding the ERC claims.
- The taxpayer has not received any notice or letter from the IRS disallowing all or a portion of the ERC claim.
To participate in the second VDA program, taxpayers need to file an application package through November 22, 2024, and do the following:
- Prepare and sign Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, including ERC-VDP Form SS-10; and
- Prepare and sign Form 2750 to extend the statute of limitations for the Assessment of Trust Fund Recovery Penalty.
If your application is accepted, the taxpayer will sign a closing agreement and pay the entire ERC refund amount required to be repaid.
If you filed an ERC claim, have not yet been paid, and now believe you are not eligible, the IRS does have a special Withdrawal Program available.
IRS Processing ERC Claims
The IRS initiated a moratorium on processing any new ERC filed after September 14, 2023. When the moratorium was initiated, the IRS indicated it would continue to process claims that had already been filed. The IRS recently indicated that it has lifted the moratorium at the end of August 2024 and is beginning to issue refund checks.
IRS Claims Denial Letters
During the moratorium, the IRS indicated it went through the process of categorizing the ERC claims in buckets of high, medium, and low risk. As a result of this categorization, the IRS has been issuing ERC claim denial letters to taxpayers whose claims were in the high-risk category. Even if you receive a claim denial letter, it doesn’t mean you are not eligible for the ERC amount. All taxpayers have the right to appeal this denial to the IRS Office of Appeals (some denial letters don’t indicate this, but all denied claims have this avenue to seek resolution of the denial). The one thing to be aware of is that you must submit a request for consideration of your denial by the IRS Office of Appeals within 30 days of the date included in the letter. If you fail to timely file this request, your only path to receive the refund is by filing a refund suit in Court.
If you have any questions on the above items or other ERC questions, contact Sara Goldhardt or Kevin Dunn.
