Scarinci Hollenbeck wants its clients to know that if you applied for an ERC and have any doubts about the veracity of your claim, the time to act is now. The Internal Revenue Service (IRS) is carefully scrutinizing ERC claims because they have detected considerable fraud caused in part by promoters of this credit. There is currently legislation on the table to end the ERC program at the end of this month (January 2024), rather than the original date in 2025. The legislation also would extend the statute of limitations on ERC audits from five years to six years. Considering the interest and penalty that could accrue over six years, careful consideration should be given to what, if any, action should be taken at this time.

For employers who made legitimate ERC claims based on a thorough analysis of the ERC rules and their applicability to that employer, the ERC is a valid credit, designed to help those who continued to pay their employees through the pandemic, despite difficult economic challenges. If, however, you made an ERC claim and are concerned about potential future ramifications, there are currently two programs in place that you might consider taking advantage of, depending on your specific circumstances. Each program has specific qualification requirements, the details of which are not discussed here.

For companies that submitted ERC claims and have either not gotten their check from the IRS or have the check, but have not cashed it, you may be eligible to simply withdraw your claim. To date, the IRS has not put a deadline on this program, but at some point, they will end the current moratorium on processing ERC claims and get through all that have been submitted. It is unclear what the IRS will do at that point, but it could be that this opportunity will be lost then.

For companies that received the credit from the IRS, but are ineligible, you might consider the IRS Voluntary Disclosure program. Under this program, you are required to return 80 percent of the amount that you received and fully cooperate with the IRS. This means filling out a specific form that identifies all individuals and entities that helped you determine and claim the credit. THIS PROGRAM IS ONLY OPEN THROUGH MARCH 22, 2024! After the program ends, you are subject to possible audits relative to your ERC credit. If it is determined that you were not eligible for the credit, you will be required to repay 100 percent of the tax, plus interest and penalty.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.