Belleville: 618-234-9800 | Edwardsville: 618-656-2244 | ST. LOUIS: 314-421-2325

By: Rebecca K. Wohltman

The IRS continues to intensify its focus on improper Employee Retention Credit (“ERC”) claims. The first ERC criminal cases are moving forward. The IRS is asking Congress for additional enforcement tools, such as expanding the time to challenge ERC claims. One proposal even suggests ending the time to file an ERC claim early.

Back in September 2023, the IRS announced a pause on processing any ERC claims. Since that announcement, the IRS has rolled out a number of ERC-related programs that are designed to allow companies to “undo” improper claims they filed.

If you filed an ERC claim (or a third party filed the claim on your behalf) but didn’t actually qualify for the credit, overstated the amount of the credit to which you were entitled, or are now questioning whether you should have filed the claim for any other reason, the IRS has options for you.

Option 1 – Withdraw the Claim. If your claim is still pending or you have not cashed your ERC refund check, you can withdraw your claim. If you withdraw your claim, the IRS will treat the claim as if it was never filed. The IRS will not impose penalties or interest if you withdraw your claim.

Option 2 – Amend the Claim. If you qualify for the ERC but not for as much of the credit as you initially claimed, you can file an amended claim.

Option 3 – Voluntary Disclosure Program. If you have already received and deposited the ERC refund but are not eligible for the credit, the voluntary disclosure program (“VDP”) may be an option. The VDP is available through March 22, 2024, and requires you to:
1. Pay back the amount of the credit less 20% (without interest),
2. Cooperate with any requests from the IRS, and
3. Sign a closing agreement.
Currently, the VDP is only available to parties that now believe they were entitled to $0 ERC.

The IRS states that going through the VDP will not exempt you from criminal prosecution if you filed a fraudulent ERC claim (or conspired to file a fraudulent claim).

Many practitioners believe the IRS will expand and extend the VDP, but such expansion or extension will remain to be seen and is not guaranteed.

We encourage you to meet with a trusted tax advisor to review your ERC claim and to consider whether any of these programs may be options for you to pursue. Especially if you engaged a company “specializing” in ERC claims, you should consider whether any of these programs is right for you.

Professional Services Disclaimer: Please note that the information presented here is as an educational service, and while it contains information about legal issues, it is not legal advice. No warranty is made regarding the applicability of the information presented to a particular client situation, and the information set forth is not a substitute for original legal research, analysis and drafting for a particular client situation.