{"id":16870,"date":"2024-03-21T00:38:04","date_gmt":"2024-03-21T05:38:04","guid":{"rendered":"https:\/\/www.sfw.cpa\/news-and-guides\/?p=16870"},"modified":"2024-03-20T19:38:04","modified_gmt":"2024-03-21T00:38:04","slug":"the-irs-unveils-ertc-relief-program-for-employers-2","status":"publish","type":"post","link":"https:\/\/www.sfw.cpa\/news-and-guides\/the-irs-unveils-ertc-relief-program-for-employers-2\/","title":{"rendered":"The IRS unveils ERTC relief program for employers"},"content":{"rendered":"

<\/head><\/p>\n

<\/p>\n

Since July\u00a02023, the IRS has taken a series of actions in response to what it has termed a \u201cflood of ineligible claims\u201d for the Employee Retention Tax Credit (ERTC). Most recently, it launched a Voluntary Disclosure Program (VDP). The program presents a valuable, but temporary, opportunity for eligible employers.<\/p>\n

Flood of invalid ERTC claims<\/strong><\/p>\n

The ERTC is a refundable tax credit intended for businesses that 1)\u00a0continued paying employees while they were shut down due to the pandemic in 2020 and 2021, or 2)\u00a0suffered significant declines in gross receipts from March\u00a013, 2020, to December\u00a031,\u00a02021.<\/p>\n

With the credits worth up to $26,000 per retained employee, fraudulent promoters and marketers quickly pounced, offering to help employers file claims in exchange for large upfront fees or percentages of the money received. But the requirements for the credit are stringent, and many employers were misled into filing claims that have proven to be invalid, leaving those claimants at risk of liability for credit repayment, penalties and interest, as well as other tax problems.<\/p>\n

IRS\u2019s response<\/strong><\/p>\n

In the face of the deluge of invalid claims, the IRS intensified audits and criminal investigations of both promoters and businesses filing suspect claims. As of December 2023, it had more than 300 criminal cases underway with claims worth nearly $3 billion, and thousands of ERTC claims had been referred for\u00a0audit.<\/p>\n

The IRS also has instituted a moratorium on the processing of new ERTC claims. And, in October\u00a02023, the agency began offering a withdrawal option for eligible employers that filed a claim but haven\u2019t yet received, cashed or deposited a refund. Withdrawn claims will be treated as if they were never filed, so taxpayers need not fear repayment, penalties or\u00a0interest.<\/p>\n

In late December\u00a02023, the IRS announced another ERTC relief initiative, the VDP. The program is intended for employers that claimed and received credit money but weren\u2019t entitled\u00a0to\u00a0it.<\/p>\n

VDP nuts and bolts <\/strong><\/p>\n

Employers that participate in the VDP may benefit in several ways. For example, they\u2019re required to repay only 80% of the credit received (if repayment in full isn\u2019t possible, the IRS may authorize an installment plan). They also aren\u2019t required to repay any interest received on an ERTC refund or amend their income tax returns to reduce wage\u00a0expense.<\/p>\n

These employers won\u2019t be subject to penalties or underpayment interest if the 80% repayment is made before the signed closing agreement is returned to the IRS. The 20% reduction won\u2019t be treated as taxable income, and the IRS won\u2019t audit the ERTC on employment tax returns for the tax periods covered by the closing agreement.<\/p>\n

An employer can apply for the VDP for each tax period in which:<\/p>\n