On the heels of its announcement that the IRS has approved 50,000 employee retention credit (ERC) claims, rejected 28,000 ERC claims, initiated 460 ERC-claim related criminal cases, and extended the ERC claim review moratorium to January 31, 2024,[1] the IRS announced today, in Announcement 2024-30, that the IRS has reopened the Voluntary Disclosure Program for the ERC claims. Pursuant to the program, taxpayers who received their ERC refunds can send back 85% of the funds they received and avoid penalties and interest on their potentially erroneous ERC claim. The IRS has discovered extensive abuse with promoters of ERC claims and has found that numerous erroneous claims were filed for this pandemic era credit. Pursuant to the previous Voluntary Disclosure Program that closed on March 22, 2024, the IRS received more than 2,600 applications from ERC recipients that disclosed over $1 billion worth of credits.
Participation in the Voluntary Disclosure Program is limited to ERC claims for the 2021 tax year. It is also to taxpayers who have received their ERC payments but have not been notified by the IRS that any type of investigation or audit is underway for their ERC claim. To participate, taxpayers will need to file IRS Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program and will need to sign a closing agreement if the IRS accepts their participation in the program.
Taxpayers should consider a due diligence review of their ERC claims to determine whether it is appropriate to participate in the new IRS’ new voluntary disclosure program. If your claim was prepared by an ERC promoter or your ERC claim and/or seems to have been done pursuant to the IRS’ “red flags”[2] for ERC claims, then participation in the Voluntary Disclosure Program may be a good option for you. The IRS is heavily scrutinizing ERC claims and has given taxpayers opportunities to withdraw or return erroneous claims. Taxpayers who received funds can participate in the newly opened Voluntary Disclosure Program. Taxpayers with pending claims can participate in the IRS withdrawal program. Given these opportunities to cancel potentially erroneous claims, taxpayers should think about whether one of these program is appropriate to avoid potential onerous penalties and the accrual of interest if their claims are denied later.
Taxpayers should consider a review of their pending or denied claims to determine if/what further action they can take on pending ERC claims, that is, where the IRS has not responded to their claims. Further, taxpayers who received IRS denials of their ERC claims have an opportunity to protest the denial to IRS Appeals. Alternatively, and if/when IRS Appeals denies their ERC claims, taxpayers can file a lawsuit in federal court to pursue their ERC claims. Moreover, taxpayers can file a lawsuit in federal court to pursue their ERC claims if their ERC claims are still pending and the IRS has not taken any action on them.
Please contact Michele Weiss at mweiss@hsdtaxlaw.com or 310-550-6200 if you have further questions regarding your pending or denied ERC claims. Michele and the other attorneys at Holtz, Slavett & Drabkin, APLC are all former IRS Counsel attorneys, who focus their practice on tax controversy matters, and can assist with these matters.
[1] IR-2024-203 (August 8. 2024)
[2] IR-2023-170 (September 14, 2023)