IRS Providing Way for Employers to Repay 80% of Questionable ERC Claims

On Thursday, December 21, 2023, the IRS announced a way for employers to voluntarily pay back 80% of questionable Employee Retention Credits (ERC) the employer claimed in exchange for voluntarily disclosing details about the vendor and the tactics they used.

Here are some highlights from the IRS about this new Voluntary Disclosure Program:

• Interested employers must apply to the ERC Voluntary Disclosure Program by March 22, 2024.
• 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.
  • Further qualifications and program details are in Announcement 2024-3.
• Those that the IRS accepts into the program will need to repay only 80% of the credit they received.
  • The IRS selected an 80% repayment because many of the ERC promoters charged a percentage fee that they collected at the time of payment or in advance of the payment, and the recipients never received the full amount.
• The IRS will not charge program participants interest or penalties on any credits they repay.
  • However, if the employer is unable to repay the required 80% of the credit at the time of signing their closing agreement, then the employer will be required to pay penalties and interest in connection with entering into an installment agreement.

Employers with a pending ERC claim are still urged to “consider a separate withdrawal program that allows them to remove a pending ERC claim with no interest or penalty. The IRS has already received more than $100 million in withdrawals as the agency continues intensifying audits and criminal investigation work in this area.”

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information. This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.