LATEST TAX NEWS

IRS urges businesses to act by Nov. 22 to resolve improper Employee Retention Credit claims through Voluntary Disclosure Program; third-party payer deadline newly extended to Dec. 31

WASHINGTON — With a Nov. 22 deadline rapidly approaching for the second Voluntary Disclosure Program, the Internal Revenue Service urgently recommends that businesses review Employee Retention Credit guidelines and resolve incorrect claims soon to avoid future issues.

And to help payroll companies and other third-party payers assist more clients with resolving incorrect ERC claims, the IRS announced today the extension of the deadline for third-party payers through Dec. 31, 2024, to use the consolidated claim process. Originally, the third-party option was set to close Nov. 22.

Amid high-pressure marketing that misled many ineligible businesses into filing claims for this pandemic-era tax credit, the IRS opened special programs to help businesses voluntarily resolve incorrect claims.

“Tax professionals and IRS staff are hearing repeatedly that many businesses very much believe they qualify for the credit when, in fact, they don’t,” said IRS Commissioner Danny Werfel. “We urge businesses with pending claims to reexamine their claims to see if they were misled and use the options to proactively resolve their issues. They should listen to trusted tax professionals, not promoters.”

The claim withdrawal program and consolidated claim program remain open, and the IRS strongly recommends that business learn about the warning signs of incorrect claims, which outline tactics that unscrupulous promoters have used and why their points are wrong. Eligibility for this credit depends on very specific facts and circumstances.

The second ERC Voluntary Disclosure Program allows businesses that received the credit after filing a claim in error to apply for this program to repay the credit, minus 15%, for tax periods in 2021. Generally, businesses that enter the program don’t have to pay penalties or interest and don’t have to repay interest received from the IRS on an ERC refund. The second ERC Voluntary Disclosure Program ends Nov. 22.

During the first Voluntary Disclosure Program more than 2,600 applications disclosed $1.9 billion worth of credits.

Programs remain open for businesses whose claims haven’t been processed

The Claim Withdrawal Program remains open for businesses who need to ask the IRS not to process an ERC claim for any tax period that hasn’t been paid yet. The IRS will treat the claim as though the taxpayer never filed it. No interest or penalties will apply.

With today’s announcement, the IRS extended its similar program for third-party payers through Dec. 31, 2024. The consolidated claim process for third-party payers was set to close Nov. 22.