Did you receive the Employee Retention Credit (ERC) during the pandemic, but now have concerns about its validity? Are you worried you might have been misled or fallen victim to aggressive marketing tactics? If so, you’re not alone. The IRS has recently launched two initiatives to address issues with the ERC: the Voluntary Disclosure Program (VDP) and the claim withdrawal process.
The ERC Voluntary Disclosure Program: A Second Chance for Erroneous Claims
In light of concerns surrounding fraudulent ERC claims, the IRS has established the VDP as a lenient pathway for employers to come forward and repay any erroneously received ERC funds. This program offers significant benefits:
- Reduced Repayment: Instead of the full amount, you only need to repay 80% of the ERC received. This can translate to substantial savings for businesses.
- No Interest or Penalties: The IRS waives interest and penalties on repaid funds, further easing the financial burden.
Who is Eligible for the ERC VDP?
Several key criteria must be met for VDP eligibility
- You haven’t been notified of a criminal investigation.
- You’re not under an IRS employment tax examination for the relevant period.
- You haven’t received a demand for repayment from the IRS.
- The IRS hasn’t received third-party information suggesting non-compliance.
How to Apply for the ERC VDP
To participate, you must submit Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program by March 22, 2024. This form can be found and submitted electronically through the IRS Document Upload Tool.
Upon approval, you’ll be required to repay the 80% remaining ERC amount. You can do this online or by phone using the Electronic Federal Tax Payment System (EFTPS). For those facing financial hardship, the IRS may consider an installment agreement on a case-by-case basis.
Why the 80% Repayment?
The IRS recognizes that many employers were targeted by aggressive ERC promoters who charged fees upfront, leaving recipients with less than the full credit amount. This 20% discount acknowledges this factor and helps alleviate the burden on businesses.
Claim Withdrawal: Another Option for Erroneous Claims
If you haven’t received an ERC payment yet, you have another option: the claim withdrawal process. This allows you to completely retract your ERC claim if you believe it was filed in error or under pressure.
Eligibility for Claim Withdrawal
To qualify for claim withdrawal, you must meet the following conditions:
- You filed your claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X).
- Your adjusted return solely claimed the ERC, with no other adjustments.
- You wish to withdraw the entire ERC claim amount.
- The IRS has not yet paid your claim, or you haven’t cashed or deposited the refund check if it was issued.
How to Withdraw Your ERC Claim
The withdrawal process depends on your specific situation:
- Payroll Company Filed the Claim: If your payroll company handled your ERC claim, consult them for guidance as they may need to submit the withdrawal request on your behalf.
- Self-Filed Claim: If you filed the claim yourself, follow these steps:
- No Payment Received: Fax your withdrawal request to the IRS using a dedicated fax line.
- Payment Received: Mail your withdrawal request with a voided check to the IRS address specified on IRS.gov/withdrawmyERC.
- Under Audit: If the IRS is already auditing your claim, contact your assigned examiner or respond to the audit notice with your withdrawal request.
Seek Professional Help if Needed
Navigating the complexities of the ERC VDP and claim withdrawal process can be daunting. If you have any questions or uncertainties, don’t hesitate to seek professional assistance. A qualified tax advisor or accountant can provide valuable guidance tailored to your specific situation. They can help you determine the most appropriate course of action, ensure compliance with IRS regulations, and minimize your potential risks. Remember, investing in professional advice can save you time, money, and stress in the long run.
The IRS’s VDP and claim withdrawal programs offer a lifeline for employers who have concerns about their ERC claims. By understanding these programs and taking proactive steps, you can address any potential issues and protect your business from penalties or interest charges. Don’t wait until it’s too late. If you have any doubts about your ERC claim, contact us today. We have a team of experienced tax professionals who can help you navigate the process and ensure a smooth resolution.