In response to concerns surrounding improper employee retention credit (ERC) claims, the IRS has introduced a second voluntary compliance settlement program. This initiative, running through Nov. 22, 2024, is designed to help businesses rectify any mistakes made in 2021 by allowing them to return 85% of the ERC funds they received. However, this program is not available to everyone. Taxpayers currently under criminal investigation, those who have already amended their returns, or those who participated in the first settlement program are ineligible.
For tax preparers, this development underscores the importance of thoroughly reviewing past ERC claims with clients, particularly those who may have second thoughts about the validity of their claims. Encouraging clients to take advantage of this program could be crucial in avoiding future legal repercussions, especially given the IRS’s heightened scrutiny and rejection of an additional 30,000 claims.
Participating in the voluntary compliance program involves submitting Form 15434, which serves as the application for the ERC voluntary disclosure program. Once approved, taxpayers can repay 85% of the funds through the Electronic Federal Tax Payment System (EFTPS) or enter into an installment agreement if they lack the necessary funds.
The IRS’s increased focus on improper ERC claims is part of a broader effort to maintain the integrity of the tax system. This includes a significant push to identify and prosecute fraudulent claims, making it essential for tax professionals to stay informed and vigilant in advising their clients.
Additionally, for those whose claims are rejected in the upcoming wave of IRS reviews, an appeals process is available. It’s vital for tax professionals to guide their clients through these options, ensuring they make informed decisions based on the latest IRS guidelines.
For more detailed information, the IRS press release provides further insights into the specifics of the program. Staying updated on these developments is key to ensuring compliance and avoiding potential issues for both tax professionals and their clients. Here’s more from NATP’s director of Tax Content and Government Relations, Tom O’Saben.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.