ECNETNews reports that the Internal Revenue Service (IRS) has reopened its Voluntary Disclosure Program (VDP) for businesses aimed at rectifying improper Employee Retention Credit (ERC) claims. This initiative is part of the IRS’s ongoing efforts to ensure compliance, allowing businesses to correct errors in their ERC claims while shielding themselves from future audits, penalties, and interest. The VDP will be accessible until November 22, 2024, providing a 15% discount on repayments, slightly less than the 20% discount from the previous program that ended in March.
In a significant move to strengthen compliance, the IRS plans to dispatch up to 30,000 letters to address improper ERC claims totaling over $1 billion. These letters will particularly target claims from Tax Year 2021 and certain later-filed claims from Tax Year 2020. Notably, businesses that receive these letters will be barred from participating in the Voluntary Disclosure Program for the pertinent calendar quarter.
Key Points:
- Reopened Voluntary Disclosure Program: Available until November 22, 2024, the VDP enables businesses to amend improper ERC claims with a 15% repayment discount, offering a pathway to avoid IRS compliance actions.
- Increased Compliance Actions: This fall, the IRS anticipates sending out approximately 30,000 letters to businesses with improper ERC claims, signaling a reclaim of credits exceeding $1 billion.
- Impact of Improper Claims: The IRS has flagged substantial improper claims from Tax Years 2020 and 2021, and the forthcoming letters will predominantly address larger claims linked to the heightened ERC maximum in 2021.
- Separate Claim Withdrawal Program: The IRS is encouraging businesses with pending ERC claims to utilize the ERC Claim Withdrawal Program, which allows employers to withdraw their claims without penalties or interest, leading to the rescindment of $677 million in claims from over 7,300 entities.
Importance of Participation:
The IRS emphasizes that businesses suspecting they received inaccurate ERC payments should seize the opportunity presented by the Voluntary Disclosure Program to resolve these matters under more advantageous terms, thus avoiding harsher consequences like audits and full repayment with penalties and interest. This program is a vital chance for businesses to align with federal tax regulations.
