Since last year, the IRS has ramped up its efforts to stop fraudulent employee-retention credit claims. On September 14, 2023, the IRS initiated a moratorium on processing any new ERC claims filed on or after the date of the moratorium. This moratorium was followed shortly after with the agency’s implementation of two new compliance programs: the ERC Voluntary Disclosure Program (ERC VDP) and the ERC claims withdrawal process.

On March 22, 2024, the IRS announced the results of its compliance efforts. According to the agency, these and other efforts have resulted in savings to the United States government of more than $1 billion.

The ERC VDP

The IRS launched the ERC VDP on December 21, 2023. Through the program, employers who had received ERC payments could return 80% of those payments to the IRS. The primary advantage of the ERC VDP was the employer’s ability to keep 20% of the claimed ERCs and also not be subject to penalties and interest on the amounts that were issued. The ERC VDP closed on March 22, 2024.

According to the IRS, the ERC VDP resulted in more than $225 million in returned ERC funds from more than 500 employers. In addition, more than 800 submissions remain pending for processing. These numbers are only through March 15, 2024, and with many employers likely waiting last minute to file an ERC VDP, it is expected that these numbers should grow.

The ERC Withdrawal Process

The IRS had similar success with its ERC withdrawal process. The ERC withdrawal process permits employers who have submitted ERC claims but who have not received payment the opportunity to withdraw those claims.

In its media release, the IRS announced that roughly 1,800 employers had agreed to withdraw their pending ERC claims, totaling roughly $251 million. Again, though, these numbers are only through March 15, 2024, and should continue to grow as more employers take advantage of the program. Unlike the ERC VDP, the withdrawal process continues to remain open after March 22, 2024.

IRS Investigations

Aside from the two compliance initiatives above, the agency has also conducted numerous investigations of ERC claims. Through its independent efforts, the IRS has assessed $572 million relating to more than 22,000 ERC claims.

What’s Next?

Although the ERC VDP closed on March 22, 2024, the IRS indicated that it may reopen the program at a later date, depending largely on what actions Congress takes, if any, with respect to the ERC. However, the IRS cautioned that a reopened ERC VDP would not offer better terms that the first iteration, which allowed employers to effectively keep 20% of the claimed ERCs.

Unfortunately, the IRS also communicated that it has more than 1 million unprocessed ERC claims. Therefore, employers who have submitted legitimate ERC claims that have not been processed yet likely will need to wait longer for a check from the IRS. An alternative to waiting would be to file a refund lawsuit, which some employers have already chosen to do.

The agency also cautioned that it intends to ramp up its compliance efforts in the near future. For example, the IRS stated that it has “thousands of ERC claims currently under audit” and that the IRS’ Office of Promoter Investigations has received “hundreds of referrals” both within and outside the IRS. In addition, the IRS will continue its criminal investigations against promoters and employers, having already initiated more than 386 criminal cases related to roughly $3 billion of ERC claims.

Finally, the IRS also addressed the existing moratorium on new ERC claims. According to the medial release, no specific resumption date has been determined—however, the agency anticipates that the moratorium will end “sometime in the late spring.”

The full IRS media release can be found here.

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