Brass Tacks – Did you qualify for the Employee Retention Tax Credit or Not?

COVID-19 wreaked havoc on businesses worldwide and through the chaos emerged a beacon of hope: the Employee Retention Credit (ERC). For countless employers, this lifeline provided crucial support during the darkest days of the crisis. However, as the dust settles and businesses strive to recover, a new threat looms just as large: retroactive claims that could jeopardize the survival of the business you have worked so hard to build.

If you or someone you know claimed the ERC, it’s time to pay attention. The IRS has sounded the alarm, declaring that many of these claims are invalid or fraudulent. They are aware of firms that told taxpayers that they qualify for the credit when they do not. These promoters collected heavy fees from hardworking businesses for sending in claims that did not qualify for the credit.

This is not just a warning; it’s a call to action for business owners. The IRS is examining paid and pending claims carefully. If the IRS determines that your business claimed the credit in error, you will have a payroll tax issue, an income tax issue and possibly a criminal tax issue to boot– not exactly a beacon of hope.

There is an escape, however. The IRS recently announced a Voluntary Disclosure Program for erroneous ERC claims. This initiative aims to assist taxpayers who may have “inadvertently” claimed the ERC. By participating in this program, you can rectify any questionable claims while mitigating potential penalties or criminal proceedings.

Here’s why engaging in the Voluntary Disclosure Program now is imperative:

Limited Time: The door slams shut on March 22, 2024.

Financial Relief: You are only required to repay 80% of the erroneously claimed amount – you can keep the other 20%.

Exemption from Interest: You won’t have to worry about repaying interest on an ERC refund.

Simplified Process: No need to amend income tax returns to reduce wage expense.

Protection from Penalties: You enjoy immunity from penalties and interest on the claimed ERC amount.

IRS Examination Immunity:  You are protected from IRS examination of ERC claims on employment tax returns within the program’s terms.

In addition to the Voluntary Disclosure Program, the IRS is offering an ERC withdrawal option. If you’ve submitted a claim but haven’t received a refund, you have the opportunity to withdraw the claim before it undergoes processing. This presents a chance to rectify any mistakes and all potential impacts.

Sharron Cirillo

As trusted advisors, our firm is committed to supporting businesses through this regulatory landscape, offering strategic insights and practical solutions to navigate the Voluntary Disclosure Program effectively. Contact us today to leverage our expertise and safeguard the financial integrity of your business in an era of heightened regulatory scrutiny and enforcement. We urge you to act swiftly. The program is scheduled to end on March 22, 2024.

To learn more, reach out to our office directly at (833) 477-6583 or visit the website here.

Sharron Cirillo, President of Tax Resolution Solutions and SC Associates. Tax Resolution Solutions provides Tax Controversy Services while SC Associates focuses on proactive Advisory, Tax and Compliance Services.