My MBA Journey: IRS Introduces Voluntary Disclosure Program for Businesses Affected by Pandemic-Era Tax Credit – CNBC

Last Updated on December 22, 2023 by Robert C. Hoopes

IRS Launches Voluntary Disclosure Program for Erroneous Employee Retention Tax Credit Claims

The Internal Revenue Service (IRS) has taken a proactive step to address an issue that arose during the pandemic, where some businesses wrongly claimed the employee retention tax credit (ERC). The ERC was specifically designed to support small businesses affected by Covid-19 and provides significant financial benefits, amounting to thousands of dollars per employee.

Recognizing the importance of ensuring the credibility of tax claims, the IRS unveiled a “special withdrawal process” in September to counter the growing number of erroneous filings for the credit. As a further measure, the agency has now launched a voluntary disclosure program for businesses that may have mistakenly claimed the ERC.

Under this program, eligible applicants have the opportunity to rectify their claims by repaying the credits received at a discounted rate. This reduction covers third-party promoter fees, offering businesses the chance to resolve the issue more economically. By participating in the voluntary disclosure program, companies can avoid potential penalties and future legal disputes.

Emphasizing the time-sensitive nature of this opportunity, IRS Commissioner Danny Werfel has made it clear that the program is only available for a limited time. The deadline to apply for the voluntary disclosure program is March 22, 2024. Businesses that believe they may have been misled by promoters are encouraged to carefully review the special programs offered by the IRS. Depending on their specific situation, they can choose between the voluntary disclosure program or the withdrawal option.

This latest initiative from the IRS aligns with the agency’s recent commitment to cracking down on questionable ERC filings. In a recent announcement, the IRS revealed that it had sent over 20,000 rejection letters to taxpayers, highlighting its dedication to scrutinizing “dubious” claims. By preventing or rectifying erroneous claims, the agency aims to ensure that the ERC reaches businesses in genuine need, providing much-needed support in the wake of the pandemic.

Small businesses that have mistakenly claimed the employee retention tax credit now have an opportunity to set things right. The IRS’s voluntary disclosure program offers eligible companies a chance to repay the credits obtained at a discounted rate, thus avoiding potential penalties and legal consequences. With a limited timeframe available, businesses are urged to seize this opportunity to rectify their claims before the March 22, 2024 deadline.