Small business owners, self-employed individuals, and entrepreneurs face a critical deadline as the Internal Revenue Service (IRS) pushes to resolve incorrect Employee Retention Credit (ERC) claims. With March 22 looming closer, the IRS urges these entities to review ERC guidelines promptly to avoid potential compliance issues.
The urgency stems from a surge in audits and investigations by the IRS into ERC claims, prompted by aggressive marketing tactics that led many businesses to file claims erroneously. To assist those who may have been misled, the IRS offers a limited opportunity for employers to rectify improper claims at a reduced cost.
IRS Commissioner Danny Werfel emphasized the importance of taking action before the March 22 deadline, stating, “The window of opportunity is closing for those with questionable claims to fix things before they receive follow-up compliance action.”
The IRS has introduced two programs aimed at helping businesses rectify improper claims. The ERC Voluntary Disclosure Program is available until March 22, 2024. This program allows employers to correct improper ERC claims by repaying the amount received, minus a 20% discount, for any tax period they weren’t eligible for ERC. By participating in this program, businesses can avoid penalties and interest.
Businesses can also withdraw pending ERC claims or return ERC checks they haven’t cashed or deposited, treating the claim as never filed. No interest or penalties will be applied in such cases.
The IRS has warned against misleading information disseminated by ERC promoters. Some misrepresented eligibility rules, leading businesses to apply for the credit when they didn’t qualify. ERC eligibility depends on specific circumstances, contrary to claims suggesting universal eligibility.
Installment agreements are available for businesses unable to pay the total amount under the Voluntary Disclosure Program. However, interest and penalties will apply, albeit from the date of the closing agreement, providing some relief compared to agreements outside of the program.
Since the IRS announced a moratorium on processing new claims on September 14, 2023, amid concerns over aggressive ERC marketing, a specified resumption date has yet to be reached, while the IRS continues to process claims submitted before the moratorium, it’s doing so with increased scrutiny and at a slower pace.
Small business owners, self-employed individuals, and entrepreneurs are encouraged to rectify any erroneous ERC claims before the deadline. By doing so, they can mitigate potential penalties and interest while ensuring compliance with IRS regulations. Time is of the essence, and prompt action is advised to avoid future complications.
Source (IRS News).
