Is Your Business Eligible for the ERC Voluntary Disclosure Program?

If your business claimed the Employee Retention Credit (ERC) during the COVID-19 pandemic, recent IRS actions may affect you. 

The IRS has introduced a voluntary disclosure program that allows businesses to correct erroneous ERC claims without facing severe penalties.

If your business is uncertain about its eligibility for the ERC or has concerns about potential IRS audits, now is the time to act.

The Voluntary Disclosure Program (VDP) will run through November 22, 2024, and allow businesses a chance to correct improper payments at a 15% discount and avoid future audits, penalties, and interest. 

During the first disclosure program that ended in March, there were more than 2,600 applications from ERC recipients that disclosed almost $1.1 billion worth of credits, according to the IRS. 

To underscore the importance of participating in the VDP, the IRS also announced it plans to mail up to 30,000 new letters to reverse or recapture potentially more than $1 billion in improper ERC claims. 

The ERC and Fraud Concerns

The ERC was designed to support businesses that kept employees on payroll during government-mandated closures or periods of revenue decline due to COVID-19. 

However, due to its complex eligibility requirements and frequent rule changes, many businesses inadvertently claimed credits they weren’t entitled to. 

The IRS has raised concerns about widespread fraud, fueled by aggressive promoters who misled businesses about their eligibility for the credit. 

The Voluntary Disclosure Program gives taxpayers an opportunity to come forward and resolve any inaccuracies in their ERC claims. Businesses participating in the program must act quickly, as the application deadline is November 22, 2024.

Key Benefits of the ERC Voluntary Disclosure Program

By participating in the voluntary disclosure program, eligible businesses can reduce their liability and avoid the full penalties that might come with an IRS audit. Here are the key benefits of participating:

Reduced Repayment: Businesses will only need to repay 80% of the erroneous ERC received, avoiding additional interest or penalties.

Protection from Future Litigation: Settling through this program can protect businesses from potential civil tax penalties and lawsuits. However, this does not preclude criminal investigations if the IRS discovers fraudulent activity

Eligibility for the ERC Voluntary Disclosure Program

To qualify for the IRS’s voluntary disclosure program, businesses must meet certain conditions:

1. They cannot be under criminal investigation or have received notice of a criminal inquiry.
2. The IRS should not have already initiated employment tax examinations or received information about non-compliance from third parties.
3. The business must not have received notice demanding repayment of the ERC

How Kugelman Law Tax Attorneys Can Help

Navigating the complexities of the ERC and the voluntary disclosure program can be overwhelming. At Kugelman Law, we specialize in tax law and can help you:

1. Review your ERC claims and determine if they were filed correctly.
2. Assist with the application process for the voluntary disclosure program.
3. Protect your business from potential penalties and IRS audits.

If your business is uncertain about its ERC eligibility or wants to ensure compliance with the IRS, contact Kugelman Law today for a consultation. Don’t wait until it’s too late to take advantage of this limited-time opportunity.