IRS Launches Voluntary Disclosure Program for Erroneous Pandemic Tax Credits

The Internal Revenue Service (IRS) has introduced a “voluntary disclosure program” aimed at businesses that have mistakenly claimed pandemic-era tax credits and wish to return them. This initiative provides an opportunity for businesses to repay these credits at a 20% discount, covering third-party promoter fees. In this article, we’ll delve into the details of the voluntary disclosure program, its benefits, and the IRS’s efforts to streamline the process.

The Need for a Voluntary Disclosure Program

As the pandemic brought about a flurry of relief measures and financial support, businesses across the United States accessed various tax credits and incentives to navigate these challenging times. However, amid the rush to secure financial relief, some companies may have inadvertently claimed credits they were not eligible for or failed to comply with the necessary requirements.

Recognizing this issue, the IRS has initiated the voluntary disclosure program to facilitate the return of pandemic-related tax credits that were claimed erroneously. This program serves as an opportunity for businesses to rectify their filings and avoid potential penalties or legal consequences.

Special Withdrawal Process Introduced in September

In September, the IRS introduced a “special withdrawal process” for companies with pending claims related to pandemic-era tax credits. This process allowed applicants to reconsider their claims and make necessary adjustments.

Building on this initiative, the voluntary disclosure program goes a step further by offering a 20% discount to applicants to cover third-party promoter fees. This discount incentive aims to encourage businesses to proactively participate in the program and rectify any erroneous claims they may have made.

Limited-Time Offer with a Deadline

IRS Commissioner Danny Werfel emphasized that the voluntary disclosure program is a “limited-time offer.” The deadline for businesses to apply for this program is March 22, 2024. This means that businesses have a specific window of opportunity to participate in the program and benefit from the 20% discount on repayments.

Werfel urged businesses that have received employee retention credits but suspect they were misled by promoters to carefully consider their options, including the voluntary disclosure program or the withdrawal option, depending on their specific situation.

Streamlining the Process and Reducing Rejection Letters

One of the primary objectives of the voluntary disclosure program is to expedite the IRS’s current method of identifying businesses that may have erroneously claimed tax credits. By offering this program, the IRS aims to streamline the process and reduce the number of rejection letters sent to businesses for “dubious” filings.

This approach not only benefits businesses by providing them with a clear pathway to rectify their filings but also eases the administrative burden on the IRS. It allows the IRS to efficiently manage the resolution of erroneous claims while maintaining transparency and fairness in the tax credit system.

Bottom-line: The IRS’s introduction of the voluntary disclosure program demonstrates its commitment to assisting businesses in rectifying erroneous claims related to pandemic-era tax credits. This initiative provides a limited-time opportunity for businesses to participate, offering a 20% discount on repayments to cover third-party promoter fees.

As the March 22, 2024 deadline approaches, businesses that believe they may have inadvertently claimed tax credits they were not entitled to should carefully consider their options. By proactively participating in the voluntary disclosure program, businesses can avoid potential penalties and legal consequences while contributing to the efficient resolution of erroneous claims in the tax system.