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IRS expands ERC amnesty program

The IRS has launched a new program for businesses that received an Employee Retention Credit (ERC) in error and want to return the funds.

In late December, the IRS announced expansion of the ERC Voluntary Disclosure Program to include employers who’d already received their checks. The program allows employers to repay 80% of the credit they received, without penalties or interest.

The ERC was created during the COVID-19 pandemic to help businesses retain employees by offering refundable tax credits on qualified wages paid. Unfortunately, the program was targeted by promoters who misled employers into filing inaccurate claims.

The flood of ineligible filings became so excessive that, in September 2023, the IRS announced a temporary moratorium on processing new claims and launched a withdrawal program for employers who realized their ERC claim might be inaccurate.

Now, the IRS has expanded the program to include employers who already received ERC payments. This new option allows them to come forward and voluntarily repay 80% of the erroneous credit. The IRS may accept installment payments on a case-by-case basis for those who struggle to repay the full amount.

The IRS set the repayment amount at 80% to help employers cover costs they may have incurred in paying a promoter to file their return. However, as part of the amnesty program, employers will be required to provide the names and details of any promoter or advisor who assisted them in completing the erroneous claim.

Employers can apply by submitting Form 15434 to the IRS by March 22, 2024. Employers who have already received a denial notice or a demand for repayment will not be eligible for the program. The IRS issued 20,000 denial letters in early December and says it plans to send additional letters soon.