The employee retention credit (ERC) has been fraught with challenges since its enactment during a rapid series of COVID-19 relief legislative packages in early 2020. Legislative changes to the ERC in 2020 and 2021, along with varying opinions regarding ERC qualifications, has created confusion for both taxpayers and the IRS. Since the mechanism for requesting an ERC refund is on the Form 941 Payroll Tax Return, taxpayers were able to submit a claim for refund until the statute of limitation for amending the Form 941 has elapsed. This statue of limitations is potentially accelerated to Jan. 31, 2024, if the bipartisan tax package (Tax Relief for American Families and Workers Act of 2024) becomes law.
The IRS issued several warnings throughout 2023 about a very high volume of fraudulent and improper ERC claims, and on Sept. 14, 2023, they announced an unprecedented pause on processing ERC claims through at least Dec. 31, 2023. On Dec. 21, 2023, the IRS released more details about the voluntary disclosure and settlement program, including program requirements and application procedures. Importantly, the application window is only open for a few short months and will close on March 22, 2024, so taxpayers considering taking advantage of this program will have to act quickly.
Our tax credit and tax controversy specialists can assist if you already filed an ERC claim and need to verify your ERC credit calculation, check your ERC exposure during M&A planning, or need to consider amending income tax returns. They can also help manage your ERC audit risk and participate in the voluntary disclosure program through March 22, 2024. All taxpayers who claimed ERC should consider an assessment from a trusted tax professional who has experience evaluating ERC eligibility, calculating the credit, and defending IRS audits.