On August 15, the Internal Revenue Service (IRS) noted in a press release that businesses may be able to resolve incorrect Employee Retention Credit claims without penalties or interest thanks to a new program. But time is running out – business owners only have until late November to take advantage of the opportunity.
Second Employee Retention Credit Voluntary Disclosure Program: What is It?
The IRS offered details of a second Employee Retention Credit (ERC) Voluntary Disclosure Practice (VDP) for businesses that may have improperly claimed the ERC in a press release, revealing that it may “allow businesses to correct improper payments at a 15% discount and avoid future audits.”
The VDP is only open until November 22, 2024. It is available to employers who, after seeking professional advice, believe they improperly claimed the ERC.
“Many of these claims were driven by aggressive marketing from unscrupulous promoters,” the news statement reported. “To help businesses caught in this situation, the IRS urges businesses to review important warning signs and eligibility requirements, and to talk to a trusted tax professional to see if the VDP is a good option.”
Details About the Second ERC Voluntary Disclosure Program
Applicants that the IRS accepts into the program will have to repay only 85 percent of the credits they received, according to details the agency provided in the press release. This program – in its second round – is open for tax periods in 2021, and employers can’t use the second VDP to disclose and pay back ERC money from tax periods in 2020.
Additionally, if the IRS paid interest on an employer’s ERC refund claim, the employer does not need to repay that interest. For employers unable to repay the required 85 percent of the credit, the IRS may consider an Installment Agreement on a case-by-case basis.
To qualify for this program, employers must offer the agency the names, addresses, telephone numbers, and other details about the services provided by advisors or tax preparers who advised or assisted them with their potentially incorrect claims.
Ultimately, this program could prove to be particularly important for businesses that may have been misled by third parties or incorrect advice. The agency is basically offering a way for businesses with dubious claims to self-correct and work with the IRS to resolve a complicated situation.
However, as a reminder, interested employers need to apply for the second Employee Retention Credit Voluntary Disclosure Program before November 22, 2024.
For more details, visit the IRS website. If you have additional questions about ERC compliance, give the team at Dayes Law Firm a call at (800) 304-8888 today to learn more! We can help to ensure full compliance with IRS regulations. Contact us now to get started.