The IRS has announced the reopening of its Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP), offering businesses a unique opportunity to correct incorrect ERC claims. This program, running through November 22, provides a 15% discount for businesses to repay improper ERC payments while avoiding future audits, penalties, and interest.
The IRS previously ran this program, ending in March, which resulted in over 2,600 applications and disclosed $1.09 billion in credits. Now, with compliance actions ramping up, the IRS has already sent out 28,000 disallowance letters to businesses with questionable claims and is set to mail an additional 30,000 letters recapturing more than $1 billion in improper ERC claims from 2021 and late 2020.
This reopening allows businesses misled by aggressive marketing tactics to resolve improper claims and avoid more significant compliance issues. The IRS urges businesses that suspect errors in their ERC claims to seek professional advice and participate in the VDP before it closes.
Additionally, the IRS offers a separate ERC Claim Withdrawal Program for those with pending, unprocessed claims, allowing businesses to withdraw without penalty or interest. This program has already seen over 7,300 claims withdrawn, totaling $677 million.
IRS Commissioner Danny Werfel emphasized that this reopening is a crucial opportunity for businesses to correct mistakes and avoid penalties, especially as the IRS continues to pursue audits, criminal investigations, and promoter enforcement related to ERC claims.
The IRS continues its compliance efforts, with thousands of audits in progress and 460 criminal cases initiated regarding potentially fraudulent claims. Businesses are encouraged to act swiftly to avoid future complications and take advantage of the current disclosure program’s benefits.
Read the full article on the IRS website here. Visit the IRS website for the full details of the ERC VDP.
If you have any questions or concerns don't hesitate to get in touch with an Axley & Rode tax advisor for assistance.
