Businesses that benefited from faulty employee retention credit (ERC) claims will get another chance to correct their mistake and avoid costly repercussions.
The voluntary disclosure program (VDP) – initially introduced by the IRS in late 2023 and ended in March 2024 – is back to give businesses owners another chance to repay unearned ERC money. The IRS program’s newest run will end November 22, according to IRS Announcement 2024-30.
While the updated terms of the VDP aren’t as favorable this time around, they still could save businesses from future audits, interest, and fees. Businesses will be allowed to repay 85% of their ERC credits instead of the full amount. The first round of the VDP offered a 20% discount, and it resulted in more than 2,600 applications and about $1.09 billion in returned ERC money.
Under terms of the VDP, participating businesses will not be charged penalties or interest on credits repaid on time. However, missed payment deadlines could lead to an installment agreement that may include penalties.
The IRS said it will send letters to about 30,000 businesses whose ERC credits might have been received improperly, many of them the result of dubious marketing tactics by tax preparers and firms that misled businesses into filing claims that didn’t meet IRS requirements. Businesses that qualify for the program will be required to provide the name and contact information for the adviser or consultant who assisted them with the ERC claim.
The ERC was designed to help businesses during the COVID-19 pandemic and was available from early 2020 to late 2021.
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