Employee Retention Credit Voluntary Disclosure Program suspended; IRS touts success

On March 22, 2024, the IRS announced the suspension of the Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP), leaving room for the possibility it could resume at a later date. Processed VDP submissions have “yielded more than $225 million from over 500 taxpayers with another 800 submissions still being processed and more being filed at the last minute before the deadline.” The service initially gave indications that the VDP would be a one-time offer. However, the government’s aforementioned recovery undoubtedly is prompting the IRS to reconsider. Whether Congress ultimately extends the statute of limitations for the IRS to assess ERC claims (see our previous article the bipartisan tax bill stalled in the Senate would extend the statute to six years) is another factor that could result in the program resuming.

In addition to the VDP, the IRS’ cumulative compliance efforts around erroneous ERC claims have recovered over $1 billion since the imposition of the moratorium on the processing of new refunds last September. These efforts include the voluntary withdrawal program that allows taxpayers to rescind claims for refund that have not yet been processed, which remains open. Over 1,800 entities have withdrawn $251 million in refund requests to date, and over 1 million unprocessed claims remain in the IRS’ backlog. The special withdrawal program remains open, but the IRS has recommended businesses quickly pursue a withdrawal.

The IRS, Criminal Investigation (CI) is currently reviewing another $3 billion in claims made, a figure that will likely expand as the Service leverages the information participants in the VDP were required to provide regarding firms that gave them advice in pursuing their refunds. The IRS “has received hundreds of referrals from internal and external sources” and “will continue civil and criminal enforcement efforts of these unscrupulous promoters and preparers.”

Lastly, the aforementioned moratorium remains in effect, and the IRS anticipates this will be the case until at least “sometime in the late spring.”

If you filed a claim requesting a refund for an employee retention credit and would like to withdraw your claim, contact our ERC specialists to help you navigate the process today.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments. Baker Tilly US, LLP does not practice law, nor does it give legal advice, and makes no representations regarding questions of legal interpretation.