IRS Reopens ERC Voluntary Disclosure Program, Announces Additional Updates on ERC Fraud Enforcement

On August 15, 2024, the Internal Revenue Service (IRS) announced that it is reopening the Employee Retention Credit (ERC) Voluntary Disclosure Program, effective immediately through November 22, 2024. As IRS Commissioner Danny Werfel explains in the IRS’ News Release, “[t]he limited reopening of the Voluntary Disclosure Program provides an opportunity for those with improper claims to come in ahead of IRS compliance work and get a discount on repayments.” However, there are limits on eligibility for filing under the ERC Voluntary Disclosure Program. Additionally, other options remain available—and these options will prove more advantageous in some cases. Find out more from Texas IRS lawyer Lawrence Brown:

What Business Owners Need to Know About the Reopened ERC Voluntary Disclosure Program

In addition to announcing the reopening of the ERC Voluntary Disclosure Program, the IRS also published two new resources for businesses that are considering voluntary disclosures. A second News Release published the same day provides an overview of the eligibility criteria and the application process, while IRS Announcement 2024-30 provides a much more in-depth look at the ERC Voluntary Disclosure Program’s requirements.

While both of these are well worth reading for ERC claimants who are considering a voluntary disclosure, here is a brief overview of some of the key facts business owners need to know:

1. The Reopened ERC Voluntary Disclosure Program is Not Exactly the Same as the Original

Although the reopened ERC Voluntary Disclosure Program is very similar to the original program that closed earlier this year, it is not exactly the same. As a result, if you researched the original program but ultimately decided not to file, you will need to carefully review the terms and conditions of the reopened program to make another informed decision this time around.

For example, one of the key differences between the original ERC Voluntary Disclosure Program and the reopened version is a reduction in the repayment discount. While ERC claimants could keep 20 percent of their invalid refunds under the original program, under the reopened ERC Voluntary Disclosure Program, this is reduced to 15 percent.

2. The IRS is Not Waiting to See if ERC Claimants File Voluntary Disclosures

While the IRS is reopening its ERC Voluntary Disclosure Program for a limited time, it is not taking a wait-and-see approach in the interim. In its News Release announcing the reopening of the program, the IRS states:

“To underscore the importance of participating in the Voluntary Disclosure Program, the IRS also announced it plans to mail up to 30,000 new letters to reverse or recapture potentially more than $1 billion in improper ERC claims. Thousands more mailings on additional questionable payments will be made in the fall.”

Crucially, the IRS’s News Release also states that “those who receive these recapture letters will be ineligible to participate in the Voluntary Disclosure Program for the calendar quarter the letter covers.”

The IRS has been aggressively pursuing ERC fraud enforcement cases throughout 2024—and, by all indications, its efforts will continue well into the future. Thus, for business owners who have ignored potential concerns about their companies’ ERC claims, now is the time to take action. While this might mean submitting a disclosure under the reopened ERC Voluntary Disclosure Program, business owners who have concerns should also carefully consider the other options they have available.

3. Business Owners Must Carefully Assess Their Eligibility to Submit a Voluntary ERC Disclosure

As we’ve already mentioned, not all businesses that improperly claimed the ERC are eligible to submit a voluntary disclosure. As a result, business owners must carefully assess their eligibility before submitting an application to the IRS. The eligibility criteria for the reopened ERC Voluntary Disclosure Program include:

• The business did not apply under the original ERC Voluntary Disclosure Program for the same tax period(s).
• The business is not under criminal investigation or facing an IRS employment tax audit for the tax period(s) in question.
• The business has not received a Letter 6577-C, Employee Retention Credit (ERC) Recapture or a demand for ERC repayment from the IRS.
• The business has not already filed an amended return to eliminate the ERC claim it is intending to voluntarily disclose.
• The IRS must not have “received information from a third party or directly from an enforcement action that the taxpayer is not in compliance.”

The last of these criteria is critical—if the IRS has already “received information” that a business improperly claimed the ERC, then the business is not eligible to file under the reopened ERC Voluntary Disclosure Program. This makes assessing eligibility a challenge, and it is one of several reasons to consult with an experienced Texas IRS  lawyer if you are considering an application.

4. Businesses That Are Not Eligible to Submit a Voluntary ERC Disclosure Should Promptly Consider Their Other Options

Since the IRS is continuing to aggressively pursue ERC fraud enforcement, businesses that are not eligible to submit a voluntary ERC disclosure should promptly consider their other options. Depending on the circumstances, these options may include submitting an amended return, filing for withdrawal, or filing under IRS Criminal Investigation’s (IRS CI) standard voluntary disclosure program. An experienced Texas IRS lawyer should be able to help you evaluate these options as well.

5. IRS ERC Fraud Audits and Investigations Are Leading to Substantial Penalties

Finally, to further underscore the importance of taking action promptly—whether under the reopened ERC Voluntary Disclosure Program or otherwise—IRS ERC fraud audits and investigations are leading to substantial penalties. These include criminal fines and prison time in many cases. To ensure that you and your business are not unnecessarily exposed, if you have ERC-related concerns, you should discuss your situation with an experienced Texas IRS lawyer as soon as possible.

Request a Confidential Call with a Texas IRS Lawyer at Brown Tax, P.C.

If you need legal advice regarding your business’s ERC filings, we invite you to get in touch. Please call 888-870-0025 or contact us online to request a confidential call with a Texas IRS lawyer at Brown Tax, P.C.