Don’t Let Time Run Out: Ensure Your ERC Claims Are Compliant and Avoid Costly Penalties with the IRS’ VDP Program
Written by: Mark Stapleton
The deadline to participate in the second round of the IRS’ ERC Voluntary Disclosure Program (VDP) is November 22, 2024. The VDP is intended to assist businesses that have received refunds from faulty or erroneous ERC claims to avoid future audits, penalties, and interest. The IRS reiterated in its recently released FY2024 Financial Report that it saw a significant amount of erroneous ERTC claims as a result of “aggressive marketing from unscrupulous promoters”, resulting in businesses unknowingly filing ERC claims and receiving refunds they were not eligible for.
Businesses that received an ERTC refund check over a year ago may feel safe from an IRS reviewing their claim. That is not the case. Highlighting the more than $98 billion it collected from tax compliance efforts across all tax matters, the IRS reaffirmed its commitment to intensify its focus to identify and audit improper ERC claims, including those for which refunds were previously sent.
The ERTC VDP can protect businesses from potential costly compliance actions in the future, such as audits, full repayment, penalties, and interest. The IRS reported that it recently sent out 30,000 ERC notices that addressed more than $1B in “errant claims.” The IRS stated that it “. . . urges businesses to review important warning signs and eligibility requirements, and to talk to a trusted tax professional to see if the VDP is a good option.”
With the window to and information necessary to complete a VDP application, it is crucial that an employer interested in the program start looking into it now. Important details about the second round of the VDP include:
- The second round of the VDP is only available for 2021 ERC claims;
- Applicants accepted by the IRS to participate in the VDP will need to only repay 85% of the credits they received;
- If the IRS paid interest on the employer’s ERC refund claim, the employer does not need to repay that interest back to the IRS.
- Installment Agreements may be available on a case-by-case basis, for employers who cannot repay the entire 85% of their ERC refunds
A business could find itself in a much worse financial position if it must pay back the full ERC amount, plus interest and penalties, along with the time and stress that comes with an IRS audit. This underscores the importance of taking proactive steps to independently verify your eligibility to claim the credit and ensure it was accurately calculated.
AGBi is here to help businesses that have filed ERC claims with our ERC Health Check and ERC Audit Defense programs. We can also assist businesses navigate the VDP application submission process as well as withdrawing their ERC claims. Additional details may be found on our website where you can also schedule a no-cost initial consultation to discuss your ERC claims.
About ABGi USA
ABGi USA is a leading tax consulting and business solutions provider specializing in 179D Tax Deductions, 45L Tax Credits, R&D Tax Credits, Cost Segregation, Executive Recruitment, Fractional HR & HR Consulting, Recruitment Process Outsourcing (RPO), and more.
With a proven track record of driving results for CPA firms and clients across industries, ABGi USA leverages its expertise to help clients optimize financial strategies and achieve business goals. Founded in 1985, ABGi operates in 10 countries, including the UK, France, Canada, and Brazil, and is committed to delivering innovative, customer-focused solutions that empower businesses to thrive.
