Deadline for ERC Voluntary Disclosure is Around the Corner

Blog readers are well aware of the IRS continuing enforcement efforts regarding the Employer Retention Credit (ERC). One tool in that enforcement effort is the ERC voluntary disclosure program for employers who received questionable ERC refunds. Introduced on December 22, 2024, the deadline for applying, March 22, 2024, is fast approaching. Any employer who has concerns about an ERC refund should consult with a competent tax advisor as soon as possible about whether they should be considering a voluntary disclosure. In addition to the ERC voluntary disclosure program, the employer can withdraw a pending ERC claim if they have not received the refund or have received but not cashed the refund check.

An employer who already received a ERC refund is eligible to apply for the ERC voluntary disclosure provided:

1. The employer is not under criminal investigation and has not been notified that they are under criminal investigation.
2. The employer is not under an IRS employment tax examination for the tax period for which they're applying to the Voluntary Disclosure Program.
3. The employer has not received an IRS notice and demand for repayment of part or all of the ERC.
4. The IRS has not received information from a third party that the taxpayer is not in compliance or has not acquired information directly related to the noncompliance from an enforcement action.

The ERC voluntary disclosure program is unique because it requires a participating employer to repay only 80% of the credit they received and the IRS will waive all potential penalties. In addition, the employer is not required to repay any overpayment interest received, nor will the employer be required to pay interest unless they enter into an installment agreement to repay the 80%. The employer must provide the IRS with the names, addresses and telephone numbers of any advisors or tax preparers who advised or assisted them with their claim and details about the services provided. Unfortunately, the ERC program does not provide protection from criminal prosecution. Employers or their advisors who are concerned with potential criminal prosecution should consider the general IRS voluntary disclosure program, which provides protection from criminal prosecution, but will require repayment of 100% of the refund the employer received. Significant penalties will also be considered and interest will be charged. Because it does not have an application deadline, the general voluntary disclosure program will continue to be available after March 22, 2024.

If you have any questions about this blog post or any other tax-related matter, feel free to contact me directly at jcrouch@meadowscollier.com.