Life is full of challenges and they can take an emotional toll. Certainly, the global COVID pandemic has been one of those challenges. The good news is that you don’t have to face such challenges alone—especially when it comes to taxes and all related matters. Kundra & Associates is here to help.
For example, as it turns out, some businesses may have taken advantage of the Employee Retention Credit (ERC) program without fully understanding the requirements and obligations of this program. This was an easy mistake to make while dealing with the challenges and stress of trying to run a business during the pandemic.
That is why the IRS implemented the original Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP). This program allowed businesses to correct errors in their ERC claims while benefiting from a 20% reduction on what they owed to the IRS, also helping them avoid audits, penalties, and interest. Referred to as a “discount” by the IRS, this 20% reduction was available to participants during the first round, which ended in March 2024. During that time, the IRS reviewed over 2,600 applications from businesses, uncovering errors and issues amounting to more than $1 billion in credits.
In July 2024, the IRS released notice IR-2024-198 to share warning signs of incorrect ERC usage. And, in mid-August 2024, the IRS announced it would reopen the ERC VDP to give businesses a chance to correct any incorrect payments. In the new temporarily reopened ERC VDP, the IRS has slightly reduced the discount, offering participants 15% off what they owe when correcting their ERC claims.
Businesses that might have submitted incorrect claims should review their submissions with an experienced tax lawyer who understands the Employee Retention Credit program and errors in filing claims. Kundra & Associates can help you face this challenge by advising you about the impact of ERC errors and whether this VDP is appropriate for your situation. With our knowledgeable and supportive guidance, you won’t need to stress about the past and can move your business towards the future with confidence.
What Was the IRS Employee Retention Credit Program?
The Employee Retention Credit program allowed some businesses and some tax-exempt organizations to claim a tax credit if they had employees affected by the COVID-19 pandemic, including businesses and organizations that:
- Were ordered shut by the government
- Had a decline in gross revenue or receipts during 2020 and 2021
- Qualified as a startup for the second half of 2021
The IRS has a checklist that further defines eligibility for the Employee Retention Credit. If you think you qualify for the credit, you should review your submission closely with our skilled tax lawyers to ensure you submitted it correctly.
IRS Voluntary Disclosure Program Provides a Payment Discount
The current Voluntary Disclosure Program allows businesses to review and resubmit their previously submitted ERC claims in case there were any errors. Besides helping businesses avoid audits and penalties, the VDP also provides 15% off on payments to the IRS. The current VDP runs through November 22, 2024. So the window for submission is limited. There is also a separate ERC claim withdrawal program for businesses with pending claims.
Warning Signs of ERC Claims with Errors
When the IRS reviewed the first Employee Retention Credit claims and Voluntary Disclosure submissions last spring, they found some issues and errors made in ERC recipients’ claims. The following are the most common issues with ERC:
- Too many quarters claimed
- Government shutdown or other shutdown claims that did not apply to your business.
- Too many employees
- Incorrect wage calculations
- Citing supply chain issues
- ERC claimed for too long a tax period
- Did not pay wages during the eligibility period
- Were not in business during the eligibility period
- Classified as an essential business, but was fully operational without a decline in gross receipts
- No proof of fully or partially suspended business operations
- Reporting family members’ wages as qualified wages
- Citing wages already used for the Paycheck Protection Program loan forgiveness
- Claims for wages for large employers with employees that provided services
These were the most common errors made on forms submitted to the IRS. If you made a claim under the ERC, you should review it with a knowledgeable attorney from Kundra & Associates who can advise you if you should revise and/or resubmit your claim during the current VDP.
ERC issues? Contact our Washington, DC Law Firm Today
The lawyers at Kundra & Associated focus solely on tax law issues. We have offices that serve clients internationally and in Maryland, Virginia, and Washington, D.C. Our attorneys help protect businesses from IRS seizures and penalties. If you think you might have errors in your Employee Retention Claim, you only have until November 22, 2024, to submit a claim. Take advantage of the dedicated tax attorneys at Kundra & Associates and call us now at 301-859-0122 to schedule a consultation or fill out our case form. We help businesses and entrepreneurs, individuals and families, and U.S. citizens and residents living abroad with domestic and international tax issues.