ARTICLE | August 17, 2024
The Internal Revenue Service (IRS) has reopened the Voluntary Disclosure Program related to problematic Employee Retention Credit (ERC) claims. The first program period received more than 2600 applications disclosing more than $1 billion in improper claims. The details of its announcement are found on this posting.
The initiative is part of the IRS' broader efforts to enforce compliance with tax laws in relation to the ERC, a benefit that was introduced under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The ERC was a credit against employment taxes for qualifying employers for certain quarters of 2020 and 2021. It's aim was to support businesses that continued to provide employment during the COVID 19 pandemic.
The IRS has been intensely auditing the ERC and has identified thousands of erroneous ERC claims. These errors range from minor mistakes to serious issues such as false or fraudulent claims. The Voluntary Disclosure Program enables businesses to come forward and rectify erroneous claims voluntarily, potentially avoiding severe penalties and criminal prosecution.
Concurrent with the new VDP window, IRS is sending out up to 30,000 letters reversing and recapturing about $1 billion in claims it asserts were improperly paid. Recipients of these notices will not be eligible for the reopened VDP.
The IRS also continues to offer a separate claim withdrawal program for those wh ohave submitted claims they now believe may have errors. The details of this program are here: https://www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim .