The Internal Revenue Service (IRS) has recently unveiled a new voluntary disclosure program aimed at employers who have received questionable employee retention credits. This program allows eligible employers to rectify any discrepancies and pay back the credits at a discounted rate. However, interested taxpayers have a limited amount of time to take advantage of this opportunity. Optima Tax Relief gives the important details about the new IRS Voluntary Disclosure Program.
What is the Employee Retention Credit?
The employee retention credit is a tax incentive provided to employers who retained their employees during the COVID-19 pandemic. It was designed to support businesses facing economic challenges and encourage them to keep their workforce employed. The program offers a means for eligible employers to receive credits against employment taxes.
The New IRS Voluntary Disclosure Program
In cases where employers have concerns about the legitimacy of the employee retention credits they have received, the IRS’s new voluntary disclosure program offers a solution. This initiative allows employers to voluntarily come forward and disclose any discrepancies or errors in their previous claims. By doing so, they can pay back the credits at a discounted rate of 80% of the claim. The IRS hopes this will provide a fair and transparent way to address any unintentional missteps. If the taxpayer cannot afford to pay the full 80%, the IRS may consider them for an installment agreement.
It’s important to note that the voluntary disclosure program has a deadline for application, and interested taxpayers must submit their applications by March 22, 2024. This deadline emphasizes the IRS’s commitment to encouraging timely and honest disclosures.
Employers considering participation in the program should carefully review their records and assess the accuracy of their previous claims for employee retention credits. This proactive approach can help businesses rectify any inadvertent errors and maintain compliance with tax regulations.
To apply for the voluntary disclosure program, employers need to first confirm their eligibility. Employers must:
- Not be under criminal investigation
- Not be under IRS examination for the tax period they are applying for
- Not have received an IRS notice or a demand for repayment for the ERC
The IRS must also not receive notice from a third party that the employer is not in compliance. Once they confirm their eligibility, employers can apply by filing Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program through the IRS Upload Tool on their website.
In summary, the IRS’s new voluntary disclosure program provides a beneficial opportunity for employers to address any concerns about the legitimacy of employee retention credits they have received. By voluntarily disclosing discrepancies and participating in the program, employers can pay back the credits at a discounted rate. With the March 22nd deadline approaching, eligible taxpayers should act promptly to take advantage of this initiative and ensure compliance with tax regulations.