IRS Reopens Voluntary Disclosure Program For ERC Claims Until November 22, 2024

In a significant move announced on August 15, 2024, the IRS has reopened its Voluntary Disclosure Program (VDP), providing businesses with another opportunity to rectify incorrect Employee Retention Credit (ERC) claims. This is the second disclosure program launched this year, following the initial program that concluded in March.

Recap of the March 2024 Voluntary Disclosure Program

The initial Voluntary Disclosure Program saw over 2,600 businesses step forward, revealing approximately $1.09 billion in improper ERC claims. This program allowed businesses to correct their mistakes and avoid further IRS scrutiny, setting a precedent for the importance of compliance.

What can you expect from the second Voluntary Disclosure Program?

This second round of the VDP, running until November 22, 2024, offers a crucial chance for businesses to resolve any erroneous ERC claims related to tax periods in 2021. Participants can benefit from a 15% discount on the repayment of these credits, helping them to avoid future audits, penalties, and interest.

Unlike the first disclosure program, which provided a 20% discount, this program is slightly reduced but remains an essential option for businesses looking to mitigate potential issues. The IRS has underscored the importance of participating, particularly for those who may have been misled by aggressive marketing tactics that overstated the benefits of the ERC.

Why should you pay attention to this second Voluntary Disclosure Program?

With the IRS intensifying its compliance actions, including audits and criminal investigations, businesses with questionable ERC claims from 2021 should consider this reopening of the VDP as a final opportunity to come forward and correct any mistakes. The IRS has also announced that it will be sending up to 30,000 letters to businesses with improper ERC claims, further emphasizing the need for timely action.

Next step for businesses…

If you have concerns about your ERC claims, it’s crucial to consult with a trusted tax professional to determine if participating in the Voluntary Disclosure Program is the best course of action for your business. A tax expert can help you assess your situation and navigate the process effectively, ensuring you make the most informed decision.

Given the program’s deadline of November 22, 2024, prompt action is essential to address potential issues and mitigate future compliance risks.