Employee Retention Credit (ERC) Update – Voluntary Disclosure Program Ended, IRS Special Withdrawal Program Continues, and Audit Investigations May Intensify

As part of Aprio’s continuing commitment to providing organizations with updated information related to the Employee Retention Credit (ERC), we wanted to share some recent developments and considerations within the ERC program.

ERC Program Status

On January 31, 2024, the U.S. House of Representatives passed H.R. 7024 that would:

• a. Terminate the ERC program for all new claims effective as of that date, and
• b. Extend the statute of limitations for individual refund audits to six years from the date of submission.

However, at this time, the bill has not advanced through the Senate, and passage is uncertain.

Barring advancement of the current bill or introduction of other legislation impacting the program, eligible employers still have the ability to file for refunds pursuant to the ERC. The statutory deadline to file varies by year:

• 2020 ERC filing expires on April 15, 2024
• 2021 ERC filing expires on April 15, 2025

IRS Voluntary Disclosure Programs:

For the second consecutive year, the IRS has recognized the potential for abuse and fraud in the ERC arena and included the program in its annual “Dirty Dozen” list, highlighting tax positions and schemes which the IRS has deemed risky for taxpayers.

In an attempt to rein in the potential for abuse in the ERC space, the IRS previously introduced a number of amnesty/voluntary disclosure programs (VDP) for taxpayers to consider in the event they believe their ERC claim was not warranted.

The available programs differed based upon a taxpayer’s claim status and are briefly detailed below. Aprio can provide specific details on each program upon request:

Rescission of an ERC claim and return of refunds previously received:

• The main takeaway: On December 21, 2023, the IRS announced a VDP, which allowed businesses that incorrectly filed for and received an ERC refund to return 80% of the previously received amounts with no interest and penalties.
• Program Status: This program closed to taxpayers on March 22, 2024. The IRS has noted that it may launch a similar program at some point in the future.
• VDP Impact: As of the closure date, the IRS had recovered approximately $225 million from 500 taxpayers, with 800 additional taxpayer VDP requests in process at that time

Withdrawal of a filed ERC claim that has either not been paid or for which a refund check has been
received and not cashed:

• The main takeaway: On October 19, 2023, the IRS announced a program that will allow certain businesses that incorrectly filed for an ERC refund to withdraw their claims without penalty.
• Program Status: This program is still available to taxpayers with no deadline set.
• Program Impact: As of the closure date, the IRS had recovered approximately $572 million from 1,800 taxpayers.
• Impact on your business: In the event you filed for ERC and the claim is a) still pending, b) you have received but not cashed the refund check, or c) you are under IRS audit for the ERC claim, you can withdraw the claim without penalty and with no future audit risk, provided your business did not file the claim fraudulently.

March 22, 2024 IRS News Release

In a recent news release, the IRS reviewed the moratorium that has been in place for their processing and payment of ERC claims filed after September 13, 2023. The IRS noted that the moratorium was designed as a temporary measure to clear out the backlog of open claims, and, although there is no clear timeline as to when claims filed after this period will be reviewed, they do anticipate that they will resume the processing of claims submitted after September 23, 2023 in the late spring of 2024.

In the same news release the IRS noted several other data points in the ERC space:

• The IRS has sent more than 12,000 letters to entities to “recapture” ERC amounts previously paid, covering cases in 2020. The IRS plans to send letters with respect to cases in 2021 starting in the next few months.
• The IRS notes that it has placed “thousands” of ERC claims under audit.
• More than 386 criminal cases involving claims of almost $3 billion in refunds are under investigation. To date, 25 of these investigations have resulted in federal charges, with 12 convictions.
• There are currently in excess of one million unprocessed ERC returns.

If you would like to discuss any of these topics with a tax professional at Aprio, please contact us at
ERC2024@Aprio.com.