ERC Voluntary Disclosure Program Deadline is Approaching

OVERVIEW

Thousands of businesses struggling to stay afloat during the COVID-19 pandemic filed employee retention credit (ERC) claims in order to retain workers during a time of economic uncertainty. Initially, the rules and qualifications were unclear, but Congress and the Department of the Treasury later issued additional guidance. Many businesses filed ERC claims without having the benefit of such guidance.

ERC Withdrawal Program

On October 23, 2023, the IRS instituted an ERC Withdrawal Program.  This was designed for businesses that have already filed an ERC claim, have not received payment from the IRS for the claim or have not cashed a claim check, and now question whether they were eligible for the ERC under the new guidance. This program allows businesses to avoid paying penalties and interest on potentially ineligible ERC claims. The IRS website provides specific details about the ERC Withdrawal Program.

ERC Voluntary Disclosure Program

On December 21, 2023, the IRS instituted an ERC Voluntary Disclosure Program (VDP), allowing a more favorable method for businesses to withdraw potentially ineligible ERC claims. Specifically, businesses participating in the ERC VDP must only repay 80% of the ERC claim. In other words, the ERC VDP allows businesses to keep 20% of funds received via the original ERC claim. The current deadline to participate in the ERC VDP is March 22, 2024. The IRS website provides specific details about the ERC VDP.

Current Uncertainty

As the law currently stands, ERC claims for 2020 can be filed by April 15, 2024, and ERC claims for 2021 can be filed by April 15, 2025. However, the U.S. House of Representatives recently approved a bill to modify the deadline for filing ERC claims for 2020 and 2021 to January 31, 2024. The bill has not yet been approved by the U.S. Senate or signed into law by the President. The IRS recently announced it sent out 20,000 denial letters to businesses that previously filed ERC claims. It is likely the IRS will start aggressively auditing and denying ERC claims for thousands of businesses. As a result, many businesses face uncertainty about entitlement to ERC payments.

Need Assistance?

Businesses with questions about their ERC claims should contact qualified tax professionals for assistance. You can reach Barclay R. Taylor, Esq. at btaylor@mmmlaw.com or William A. Stone III, Esq. at wstone@mmmlaw.com.