Businesses Must Act Before November 22

The Internal Revenue Service (IRS) has issued an urgent reminder to American businesses about the importance of addressing improper Employee Retention Credit (ERC) claims. If your business has filed for the ERC and later discovered inaccuracies, it’s crucial to take swift action to avoid penalties, interest, and potential audits.

Act Before the Deadline

The IRS has introduced a chance for businesses to correct improper ERC claims through the Second Employee Retention Credit Voluntary Disclosure Program (ERC VDP). The deadline to apply is November 22, 2024, and businesses that act quickly can benefit from several advantages, including:

• 15% Penalty Discount: Businesses can resolve discrepancies with a reduction in penalties.
• Interest Avoidance: Timely corrections will help businesses avoid accumulating interest charges.
• Audit Protection: By participating in the program, businesses can reduce the likelihood of future audits related to ERC claims.

The IRS strongly encourages businesses to review their ERC eligibility and consider applying to this program if they have received ERC payments but are unsure of their accuracy.

Benefits of Correcting ERC Claims

Correcting ERC claims through the Voluntary Disclosure Program offers multiple benefits for businesses, including:

• Mitigating Risks: Avoid significant penalties and interest charges that can harm your finances.
• Maintaining Compliance: Correcting errors ensures your business complies with IRS regulations, protecting its reputation.
• Cost Savings: The 15% penalty discount significantly reduces the financial burden of correcting errors.

Claim Withdrawal Program

For businesses whose ERC claims are still under review or unpaid, the IRS also offers a Claim Withdrawal Program. This program is ideal for businesses that realize their claims were made in error before they have received any payments.

Here’s what businesses should do if they are in this situation:

• Review Eligibility Criteria: Revisit the IRS Employee Retention Credit Eligibility Checklist.
• Seek Expert Advice: The IRS recommends consulting a trusted tax professional for guidance.
• Submit a Claim Withdrawal: This prevents any improper payments from being issued, thus avoiding the need for future corrections.

Identifying Improper ERC Claims

The IRS has flagged several warning signs that could indicate improper ERC claims. Businesses should be cautious and seek professional advice if:

• The eligibility requirements for ERC claims are unclear.
• There has been reliance on third-party services promising large refunds without sufficient documentation.
• Claims were made without a comprehensive review of payroll tax filings and related documentation.

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How to Stay Compliant

If your business is concerned about the legitimacy of its ERC claims, here are some actionable steps to follow:

• Use the IRS Eligibility Checklist: This tool is available on the IRS website and helps ensure your claims meet the required criteria.
• Consult a Tax Professional: A trusted expert can guide you in reviewing and correcting any discrepancies.
• Apply for Voluntary Disclosure: If your claims are in question, apply before the November 22, 2024 deadline to avoid future complications.

Taking proactive steps now to ensure compliance will help protect your business from audits, penalties, and financial risks down the line.

FAQs

• What is the ERC VDP deadline?
  • The deadline for the ERC Voluntary Disclosure Program is November 22, 2024.
• How much is the penalty discount in the ERC VDP?
  • The penalty discount is 15%.
• What is the Claim Withdrawal Program?
  • This program allows businesses to withdraw unpaid ERC claims before any payments are issued.
• Why should I hire a tax professional for ERC claims?
  • A tax professional can ensure the accuracy of your claims and help you remain compliant with IRS rules.
• Where can I find the ERC eligibility checklist?
  • The ERC eligibility checklist is available on the IRS website.