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The IRS has announced a voluntary disclosure program to allow certain employers who received questionable Employee Retention Tax Credits (ERTC) to repay them at a discounted rate. To qualify for this program, 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. The deadline for applications is March 22, 2024.

This announcement is the latest in a series of actions the IRS has taken to address fraudulent or inaccurate ERTC claims resulting from aggressive so-called “ERTC mills.” After issuing warnings to employers about unscrupulous practices, the IRS announced an ERTC claim withdrawal process for employers who believe they have fallen prey to ERTC mill practices and believe their claims are not valid, if payment has not been issued. The IRS has already received more than $100 million in claim withdrawals.

This latest action by the IRS allows employers who already received the tax credits to repay money from erroneous claims at an 80% discounted rate. Additionally, the IRS will not assert civil penalties related to the erroneous claim as long as the employer remits full payment of 80% of the claimed ERTC.

“The disclosure program provides a much-needed option for employers who were pulled into these claims and now realize they shouldn’t have applied,” said IRS Commissioner Danny Werfel. “From discussions we have had with taxpayers and tax professionals around the country, we understand that there are many employers eager to correct their error, but who remain concerned about their ability to pay back the portion of the credit that has been lost to the promoter that brought them into this mess.”

Employers accepted by the IRS under the Voluntary Disclosure Program will not have to repay interest that the IRS paid on the original ERTC refund claims. If an employer is unable to repay the 80% of the credit, they may be considered for an installment agreement, pending submission and review of a Form 433-B, Collection Information Statement for business and all required documentation.

Further qualifications and program details are in Announcement 2024-3 and on the Frequently Asked Questions page maintained by the IRS. The IRS recommends that employers work with trusted tax professionals who thoroughly understand ERTC eligibility rules and learn the warning signs of ERTC scams.

Watch for an update on the status of the September 2023 moratorium the IRS placed on processing new ERTC claims in the coming days.

For more information, connect with one of our CBIZ tax professionals today.

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