Tax Tip 2024-09: Businesses should review Employee Retention Credit rules and resolve incorrect claims soon

IRS Tax Tips

February 20, 2024

Issue Number: Tax Tip 2024-09

Businesses should review Employee Retention Credit rules and resolve incorrect claims soon

The IRS urges businesses to review their eligibility for the Employee Retention Credit because there?s limited time for them to voluntarily resolve incorrect claims and avoid future issues, such as penalties and interest.

Some honest businesses were misled into filing claims for the Employee Retention Credit by promoters who often misrepresented or oversimplified eligibility rules. Businesses that received the credit but don?t meet the ERC rules should consider applying for the?ERC Voluntary Disclosure Program?before the March 22 deadline. The IRS also offers a?withdrawal program?for those whose claims haven?t yet been paid.

The ERC, sometimes called ERTC, is a refundable tax credit for certain eligible businesses?and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic. The requirements vary depending on the time of claim, and it is not available to individuals.

ERC Voluntary Disclosure Program open until March 22, 2024
Businesses that filed a claim in error and received a payment may be able to apply to the IRS?Voluntary Disclosure Program. The special program runs through March 22, 2024, and lets taxpayers repay just 80% of the claim received.

Withdrawal program still available for pending ERC claims
The IRS continues to accept and process requests to?withdraw a full ERC claim. Employers that claimed an ERC that hasn?t been paid can withdraw their claim so they don?t get a refund for which they're ineligible and can avoid penalties and interest. They can also withdraw their claim if they've received a check but haven?t deposited or cashed it.

ERC information for businesses with questions
IRS offers resources online to answer questions and help employers check whether they?re eligible for the credit. They can review the ERC?frequently asked questions?and the ERC Eligibility Checklist, which is available as an?interactive tool?or as a?printable guide. The IRS also has free recorded webinars for the withdrawal process and the VDP.

Moratorium status
Following concerns from tax professionals and others about aggressive ERC marketing, the IRS announced on Sept. 14 a?moratorium on processing new ERC claims. In the coming months, the IRS plans to continue steps on fraud protection measures, which are necessary before the IRS anticipates resuming processing of claims submitted after the Sept. 14 moratorium. A date hasn?t been determined.

The IRS continues to process ERC claims submitted before the moratorium, but with higher scrutiny and at a much slower rate.

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Issue Number: Tax Tip 2024-09