Business Tax Alert – Improper Employee Retention Credit Claims

While the IRS continues its expansive efforts to deny of improper Employee Retention Credit (ERC) claims, intensifying audits and pursuing civil and criminal investigations of potential fraud and abuse, there are several options that may still be available for those businesses who wish to resolve these matters to avoid these possible consequences.  Recently, the IRS announced the details of a second employee retention credit Voluntary Disclosure program (ERC-VDP) for employers who claimed and received an ERC refund for a tax period in 2021 but were not eligible. Like the first ERC-VDP, the program will allow claimants to repay ERC at a reduced rate of 85% of the credit; this is slightly less favorable than the original ERC-VDP that allowed employers to repay 80% of their credits. Applications to participate in the second ERC-VDP will be accepted only until Nov. 22, 2024. The further benefits of the second program waive penalties and interest on the full amount, not just the 85% returned.  The 15% reduction is not taxable as income and the IRS won’t examine (audit) ERC on your employment tax return for tax period(s) resolved within the terms of the second ERC-VDP.  You also don’t need to repay any interest you received on your ERC refund.  To qualify accepted applicants must execute a closing agreement confirming that they are not entitled to ERC and will be required to provide the name and contact information for any preparer or advisor who assisted in claiming the ERC. Additionally, the IRS released five more red flag issues they are regularly seeing in newly processed ERC claims; the agency recommends that businesses whose claims fall into any of these warning sign categories consider participating in the second ERC-VDP or the ERC Withdrawal Program.

To find out more about how Wilson Tax Law Group, could help with your tax litigation and defense needs, we invite you to set up a  consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)