ERC Claims Error? Here’s What The IRS Wants You to Do

If you suspect inaccuracies in your ERC claim, the IRS has outlined several options to help you correct the issue and avoid potential penalties and audits. Here’s a detailed guide on the steps you can take to resolve incorrect ERC claims according to IRS guidelines.

Options to Resolve Incorrect ERC Claims

1.     ERC Withdrawal Program

The ERC Withdrawal Program allows businesses with questionable or unprocessed ERC claims to withdraw their claims without facing penalties or interest. By opting into this program, the IRS treats your claim as though it was never filed.

If you believe your ERC claim might be incorrect or you no longer wish to pursue it, consider applying for withdrawal through the ERC Withdrawal Program. This option is particularly useful for avoiding future compliance issues and ensuring that you are not held liable for any potential errors.

2.     Amending your return

If you have already received ERC funds but realize there were mistakes in your claim, you can amend your return to correct the claimed credit amount. This involves updating your return with accurate figures and addressing any discrepancies.

File an amended return to reflect the corrected ERC amount. This process involves submitting Form 941-X (for correcting employment tax returns) to the IRS. Be sure to include detailed explanations for the changes and any additional documentation that supports your revised claim.

3.     Voluntary Disclosure Program

In August 2024, the IRS reopened the Voluntary Disclosure Program, which offers businesses a structured way to correct their claims while avoiding severe consequences like audits or heavy penalties. This program is particularly important for businesses that may have unintentionally claimed the ERC in error and want to come forward voluntarily before the IRS identifies the mistake.

By applying for the Voluntary Disclosure Program, businesses can disclose their ERC errors to the IRS and make necessary corrections, often resulting in reduced or waived penalties and interest. This proactive step can demonstrate your commitment to compliance and transparency, which may be beneficial if your business is subject to future IRS scrutiny. In addition to that, participation in the program can protect your business from more serious repercussions, such as criminal charges or extensive financial penalties, that might arise from non-disclosure.

Why it matters?

Addressing incorrect ERC claims promptly is important to avoid complications such as audits, penalties, and repayment demands. Using the IRS’s available options helps you correct errors, demonstrate compliance, and protect your business’s financial health.

Final Thoughts

Resolving incorrect ERC claims requires careful attention and prompt action. By leveraging the IRS’s options—whether withdrawing your claim, amending your return, or participating in the Voluntary Disclosure Program—you can address inaccuracies and avoid future problems. Stay informed about IRS updates and act swiftly to safeguard your business from potential repercussions.

If you need assistance with these processes, you can contact us at (305) 564-9199 or fill out our website contact form. We can help guide you through the necessary steps and ensure that your claims are accurate and compliant.