The Employee Retention Credit (ERC), initially introduced as part of the CARES Act in 2020 and extended through subsequent legislation, aims to provide financial relief to businesses impacted by the COVID-19 pandemic. However, claiming this credit requires adherence to specific criteria outlined by the IRS. In light of this, the IRS has issued a reminder urging businesses to review their qualifications for the ERC diligently.

What is the Voluntary Disclosure Program?

For those who may have erroneously claimed the credit without meeting the eligibility requirements, the IRS has provided a lifeline in the form of the Voluntary Disclosure Program. This program offers a pathway for businesses to rectify their claims before the impending March 22 deadline, thereby avoiding potential penalties and interest on incorrect filings.

The Voluntary Disclosure Program will be open until March 22, 2024, with provisions from the IRS that allow businesses to repay just 80% of the claim received—considering that ERC promoters frequently took around 20% of the payment. The program is a crucial opportunity for businesses to proactively address any discrepancies and ensure compliance with tax regulations.

What if my ERC claim is already pending?

Additionally, recognizing the complexity and uncertainty surrounding ERC eligibility, the IRS has introduced a special withdrawal program for employers with pending claims and concerns about their eligibility status. This program offers a means for affected employers to reassess their situation and withdraw their claims if necessary, mitigating the risk of penalties and repercussions down the line.

Will there be any special training on ERC qualification?

The Criminal Investigation (CI) division of the IRS is launching a nationwide initiative aimed at bolstering tax professionals' understanding of the ERC. This initiative underscores

the IRS's commitment to ensuring that tax professionals have the knowledge and resources necessary to navigate ERC claims effectively and accurately.

CI special agents will host a series of educational sessions tailored specifically to tax professionals at field offices throughout the United States. These sessions, scheduled for February 2024, will serve as comprehensive workshops covering various aspects of the ERC, including eligibility criteria, documentation requirements, and best practices for compliance and accurate reporting.

What sets these sessions apart is the targeted focus on tax professionals who have previously claimed ERCs for their clients on past tax returns. By tailoring the content to experienced professionals, the sessions aim to provide advanced insights and strategies that can enhance their ability to serve clients effectively.

Attendees can expect CI special agents to walk them through ERC eligibility criteria in detail, provide guidance on the documentation requirements necessary to substantiate ERC claims, and ensure that attendees are well-equipped to navigate the documentation process with confidence.

These educational sessions will also delve into best practices for compliance and accurate reporting, offering practical tips and strategies to mitigate the risk of errors or discrepancies in ERC filings. With CI special agents leading the discussions, attendees will benefit from firsthand insights and expertise derived from their extensive experience in tax enforcement.

The CI-lead workshops will take place in at least 23 U.S. states and the District of Columbia, ensuring widespread accessibility for tax professionals nationwide. Invitations to attend will be distributed via mail through the U.S. Postal Service, providing recipients with all the necessary details to participate in these invaluable educational sessions.

Is the IRS still processing new ERC claims?

On September 14th, the IRS announced a moratorium on processing new ERC claims, signaling a pivotal shift in approach aimed at safeguarding against potential fraud and ensuring the integrity of the credit.

During the four-month moratorium period, the IRS is doubling down on efforts to implement robust fraud protection measures. These measures are deemed necessary before the IRS can confidently resume processing new ERC claims. While a specific

resumption date has not yet been determined, the IRS remains steadfast in its commitment to fortifying the ERC program against abuse and exploitation.

It's important to note that while new ERC claims are temporarily on hold, the IRS continues to process claims submitted before the moratorium went into effect. However, these claims are subject to enhanced scrutiny and are being processed at a significantly slower rate compared to previous procedures. This cautious approach underscores the IRS's dedication to rooting out fraudulent claims and safeguarding businesses and organizations from potential financial harm.

Since the announcement of the moratorium in September, the IRS has grappled with processing over $1 billion in ERC claims. Enhanced compliance reviews are being conducted to meticulously scrutinize claims submitted before the moratorium, ensuring that only legitimate claims receive approval. This rigorous review process is crucial in combatting fraud and protecting taxpayers from the consequences of erroneous or fraudulent claims.

At Drake Software, we understand the challenges businesses face in navigating the intricate landscape of tax regulations. That's why we're committed to making sure our clients are equipped with the resources they need to make informed decisions and maximize their tax benefits while staying compliant.

Sources: IR-2024-21, IR-2023-193