Are you a business owner who claimed the Employee Retention Credit (ERC), but now you’re in a panic after all the news of fraudulent claims and criminal investigations?

If so, there may be some good news for you from the IRS, if you act quickly enough.

If you fell for an ERC scam and received the credits — but it turns out that you weren’t actually eligible or your claim was bigger than allowed — the IRS has launched a new Voluntary Disclosure Program to make it possible to pay back money you received erroneously.

At first, giving money back to the government might not sound like “saving” exactly. But landing with bigger penalties or even criminal prosecution later is likely to cost a whole lot more.

If you want to take advantage of the new program, you have to act quickly! This opportunity will only be available through March 22, 2024. If you don’t file by then, you’ll be out of luck and won’t be able to apply.

Here’s what you need to know about the IRS ERC Voluntary Disclosure Program:

Who Can Apply to the IRS Employee Retention Credit Voluntary Disclosure Program?

First off, the ERC is a tax credit, designed as a pandemic relief program for employers who continued to pay their employees during specific dates of the pandemic.

Due to employers getting wrapped into applying for credits in error by fraudulent promoters, the IRS announced options to help businesses get out of it — and this program is the latest one.

Any employer who already received the ERC but wasn’t entitled to it can apply to the new program, as long all of the following apply:

• The employer is not under criminal investigation and has not been notified that they are under criminal investigation.
• The employer is not under a civil IRS employment tax examination for the same tax period for which they’re applying to the Voluntary Disclosure Program.
• The employer has not received an IRS notice demanding repayment of part or all of the ERC.
• The IRS has not received information, directly or indirectly, that the employer is not in compliance.

What’s So Great About Paying Money Back to the IRS?

It might seem counterintuitive at first. You got money from the IRS, maybe you aren’t totally sure you were eligible, but you haven’t gotten caught — yet.

The operative word is “yet” and if you do get caught, the costs will be even greater. That’s why it’s a good idea to consider applying to the Voluntary Disclosure Program.

Also, the IRS is giving taxpayers some incentives to encourage them to apply. The biggest benefit is that the IRS is not going to require you to pay back 100% of the credit you received. They are only going to require you to pay back 80%, and if the IRS paid you interest, they won’t make you pay back the interest or pay penalties on any credits repaid through this program.

Why Is the IRS Only Requiring Businesses to Pay Back 80% and Not 100% of the ERC?

 That’s because the IRS has received so many fraudulent ERC claims and can’t possibly go after everyone. So, it will save the government money in the long run if employers come forward and disclose through this program.

Also, many of the ERC mills that convinced businesses to apply for credits they didn’t actually qualify for have already charged them big fees to file for credits on their behalf.

What If You’re Selected for the Program, But Can’t Afford to Pay Back 80% of the Credits You Received?

Maybe you thought the credits were rightfully yours and already spent the money. If you’re unable to repay the required 80% of the credit when you sign your closing agreement with the IRS, then you may be able to enter into a payment plan, known as an installment agreement.

That will require providing a financial statement called a Form 433-B, Collection Information Statement for Businesses, and all required supporting documentation. And if your payment plan is approved, you will also have to pay penalties and interest as part of it.

What Information Do You Need to Give the IRS to Qualify for the ERC Voluntary Disclosure Program?

The IRS is also interested not only in recovering a lot of their losses, but also in obtaining information. The IRS wants to get the details so it can go after fraudulent ERC promoters — and hold them accountable.

So, in order to qualify for the IRS ERC Voluntary Disclosure Program, you must provide the IRS with names, addresses, and telephone numbers of any advisors or taxpayers who advised or assisted with your claim and details about the service provided.

Why does the IRS care about that? It’s because many of the ERC “mills” that helped taxpayers file for credits didn’t put their own names and contact on the tax returns they filed for employers.

How Do You Apply for the ERC Voluntary Disclosure Program?

You can apply file for the program by filing Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program and submitting it using the IRS Document Upload Tool.

If you use a third-party payroll service, you will have to apply through that payroll service.

What Happens After You Apply to the Program?

After a business owner applies to the program, an IRS employee will contact them to go over the application and answer any questions.

If you hire a qualified tax attorney to help you with your application, they will talk to the IRS for you and handle any questions and answers on your behalf.

What Happens If You Are Approved to Participate in the IRS ERC Voluntary Disclosure Program?

If you’re approved for the program, you will receive a closing agreement in the mail from the IRS. Then you must pay 80% of the ERC you received back to the IRS, and then sign and return the closing agreement.

In a situation where you can’t afford to pay in full all at once, you might be able to get a payment plan — but remember that comes with interest and penalties. The IRS is advising taxpayers in this situation to consider getting a loan to avoid the extra cost.

How Can a Licensed Tax Attorney Help You if You With Fraudulent ERC Claims?

If you’ve made an ERC claim and you’re afraid your claim wasn’t legitimate, a licensed tax lawyer can review your claim and help figure whether applying to the Voluntary Disclosure Program makes sense for you.

An experienced tax lawyer can also help you apply for the program and ensure you’ve met all requirements in doing so, and talk through other possibilities, such as withdrawing your ERC claims.

Speak with a tax lawyer now.