Discounted Repayment Program for Invalid ERC Claims

Between now and March 22, 2024, businesses that received employee retention credit (ERC) funds but did not qualify for the credit may apply to repay the credit at a discounted rate. While the ERC program gave vital assistance to many employers during the pandemic, it also became a target of scammers, who lured ineligible business owners into falsely claiming the credit.

Under this new voluntary disclosure program, taxpayers whose applications are approved by the IRS will only have to pay back 80% of the credit amount. The remaining 20% will be forgiven without penalty, since many businesses lost a percentage of their credit to ERC promoters. Note that if a business uses a third-party payroll management service, that third party must submit the application to participate in the discounted repayment program.

The IRS also reminds businesses to act quickly to withdraw pending questionable ERC claims. Taxpayers whose ERC applications have not yet been processed, or who received an ERC refund check but not cashed it, may be able to withdraw their applications (and return the check) without penalty. A business tax professional can help determine whether an ERC claim was valid, and if not, what steps can be taken to try to resolve the issue.