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  • Writer's pictureLouis DiMeglio

Navigating the IRS Voluntary Disclosure Program: A Personal Finance Guide for Businesses Duped by Pandemic-Era Tax Credit



In recent developments, the IRS has introduced a "voluntary disclosure program" targeted at businesses that may have erroneously claimed the pandemic-era Employee Retention Tax Credit (ERC). This blog post aims to shed light on the key details of this program and its implications for businesses.


Understanding the Employee Retention Tax Credit (ERC):

The ERC, designed to provide support to small businesses impacted by the Covid-19 pandemic, offers significant financial relief worth thousands per employee. Unfortunately, the attractiveness of this tax break has led to the emergence of a concerning trend where some businesses were encouraged to incorrectly claim the credit.  To address this issue, the IRS introduced a "special withdrawal process" in September for companies with pending ERC claims. This paved the way for the subsequent unveiling of the Voluntary Disclosure Program, offering businesses an opportunity to rectify their claims.

 

Key Features of the Voluntary Disclosure Program:

  • 20% Discount for Repayment: The program allows applicants to repay the claimed credits at a 20% discount, intended to cover third-party promoter fees.

  • Limited-Time Offer: IRS Commissioner Danny Werfel emphasized that this is a "limited-time offer." Businesses intending to participate must act promptly as the deadline to apply is March 22, 2024.

  • Reviewing Special Programs: Werfel urged ERC recipients who suspect they were misled by promoters to carefully review the available options under the voluntary disclosure program or the withdrawal option, depending on their circumstances.


Businesses interested in the program can apply by filing Form 15435, which can be conveniently submitted through the IRS' document upload tool. This step is crucial for those looking to rectify their claims and avoid potential penalties. Participants in the voluntary disclosure program can avoid interest and penalties by repaying 80% of the credited amount upon signing the closing agreement. However, it's important to note that interest and penalties will be applicable for those opting for repayment via installment agreements.

The IRS's proactive approach in cracking down on "dubious" filings is evident in its recent announcement of sending over 20,000 ERC rejection letters to taxpayers. This further emphasizes the importance of businesses reassessing their claims and taking corrective action through the voluntary disclosure program.

 

As a business owner, staying informed about these developments is crucial. The voluntary disclosure program provides an avenue for businesses to rectify ERC claims and ensure compliance. If you believe you were misled in to claiming the ERC PayTech Trust strongly urges you to contact a trusted tax advisor for more information

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