I hate to drop this on you just as tax season is starting, but…IRS squeezed in another deadline for tax pros – March 22, 2024. Applications to participate in the new Employee Retention Credit Voluntary Disclosure Program (ERC-VDP) must be filed by 11:59 pm on March 22, 2024.
The ERC-VDP will allow certain businesses to pay back ERC money that they were not entitled to claim. Tax pros will need to know whether their client is eligible to participate, wants to participate, and can meet the deadline to be considered. Then we tax pros will need to present advice on whether the client should participate.
To be eligible, a business must have claimed an ERC and received credit or a refund. They cannot be under criminal investigation and the IRS cannot already have information that they were noncompliant. Additionally, they cannot be under an employment tax examination for any period in the ERC-VDP nor can they have already received a notice and demand for repayment of all or part of the credit.
If eligible, the business must repay 80% of the ERC, keeping 20% and any interest. The business does not reduce wage expenses on income tax (because they admit they were not eligible for the credit). There are no civil penalties assessed related to any underpayment if the business remits full payment. If any ERC was for 2020, the business must extend the assessment statute of limitations to April 15, 2025. AND…the business must provide detailed information on any preparer or advisor that helped with the ERC claim and cooperate with the IRS with requests for more information. OH…all of this must be uploaded through the IRS Document Upload Tool by 11:59 pm on March 22, 2024. No extensions.
Here are just a few considerations on the ERC-VDP:
- What happens if a business does not participate? (FAQs have some scary thoughts on penalties, interest and criminal prosecution).
- Do all periods have to be included? No. Only the periods that qualify.
- ERC-VDP may be a good option for the client who got scammed into filing a claim when they were not eligible or the client who may have calculated their ERC without considering wages used for PPP loan forgiveness or another government program. ERC-VDP may be a good idea for the shady character client, but they will probably not opt in because they are, well, shady.
If you want to talk to a real person about the program, call the ERC-VDP hotline at (414) 231-2222.
Note: Mark Seid, EA, CPA, USTCP has also released a 1-credit course that dives deeper into this topic: Employee Retention Credit – Voluntary Disclosure Program.