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IRS Launches Temporary Voluntary Disclosure Program So Employers Can Avoid Penalties

15 Jan

Update Applicable to:  Effective date
  All employers and businesses that filed erroneous ERC claims    From December 22, 2023 to March 22, 2024

What happened?

The Internal Revenue Service (IRS) launched a Voluntary Disclosure Program on December 21, 2023, allowing employers to pay back 80% of the credit received via an Employee Retention Credit (ERC) claim.

What are the details?

Due to the aggressive marketing around ERC (also known as Employee Retention Tax Credit or ERTC) that misled some employers into filing claims, the IRS launched a program aimed at employers and businesses that filed a claim in error.

  • Employers can pay 80% of the credit received without interest or penalties, but if not able to pay, the IRS may consider an installment agreement on a case-by-case basis.
  • If the employer is unable to repay 80% of the credit at signing, penalties and interest are incurred for installment agreements.

The reason for selecting 80% of repayment is that some ERC promoters charged a fee that they collected at the time of payment or in advance, and the recipients never received the full amount.

Information regarding the application to the program is as follows:

  1. Who can apply?
  2. How to apply
  3. For outsourced payroll
  4. FAQs
  5. What to do if approved

The IRS urges employers with pending ERC claims to consider a separate withdrawal program that allows them to remove a pending ERC claim with no interest or penalty previously reported by Vensure here: link.

Business Considerations

  • With this announcement, the IRS is providing a limited window to make a voluntary disclosure if the employer does not believe they are properly qualified for the credit and would like to participate in a structured settlement. Review the possibility of withdrawing the ERC.
  • Follow the steps provided by the IRS and consider entering into an agreement with the IRS complying with the required documentation.
  • If you believe that you are entitled to an ERC claim but do not know how to proceed, seek counsel from a tax professional for further assistance.


Source References

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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