The IRS’s ‘Last Call’ to Correct Inflated ERC Claims

In the high-stakes arena of tax compliance, awareness and proactive action are more crucial than ever when it comes to navigating the complex terrains of tax credits and governmental programs. One program that has garnered significant attention, for reasons both good and controversial, is the Employee Retention Credit (“ERC”) program. 

This program has become a focal point of concern due to the emergence of fraudulent scamming companies promoting the credit. These companies, often referred to as “ERC mills”, impose excessive claim preparation fees and use aggressive marketing tactics promising business owners with effortless access to ERC funds. The issue at the heart of this gold rush is the lack of genuine tax expertise among the majority of these mills. Their profit is directly tied to the figures they claim, which has resulted in a flood of inflated or completely fraudulent claims. 

Unfortunately, most employers are unaware that the taxpayer is the party that ultimately bears the responsibility for the accuracy of the application. Recognizing the precarious position that millions of business owners find themselves in after having worked with ERC mills, the IRS developed a solution – the ERC Voluntary Disclosure Program (“ERC-VDP”). This unprecedented program allows taxpayers to amend their ERC claims penalty free and marks a rare instance where the IRS extends a lifeline to businesses caught in the tumultuous aftermath of ERC abuse. 

Advantages of the ERC-VDP:

  • You need to repay only 80% of the ERC you received (the IRS established this percentage to account for the standard 20% fee charged by ERC mills).
  • The 20% reduction is not taxable as income.
  • You don’t need to repay any interest you received on your ERC refund.
  • You don’t have to amend income tax returns to reduce wage expenses.
  • The IRS will not charge penalties or interest on the claimed ERC amount if you pay it in full by the time you return your signed closing agreement to IRS.
  • The IRS won’t examine your employment tax return for tax period(s) resolved within the terms of ERC-VDP.

Who Can Apply?

  • Your ERC claim has been processed and paid;
  • You now think that you were entitled to $0 ERC;
  • You’re not under examination/audit by the IRS;
  • You’re not under criminal investigation by the IRS; and
  • The IRS has not reversed or notified you of intent to reverse your ERC to $0. 

With the ERC-VDP open until March 22, 2024, time is of the essence. This is your opportunity to rectify any discrepancies in your ERC claims and steer clear of potential severe consequences, including hefty fines and allegations of tax fraud.

Business owners harboring any doubts or concerns about their ERC applications are urged to consult with a legal tax professional before it is too late. 

The clock is ticking; the time to act is now.


LS Carlson Law

Tax Attorneys

(949) 421-3030

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