Wilt Toikka Kraft LLP


IRS Sustains Assertive Monitoring and Enforcement of Employee Retention Credits

The Employee Retention Credit (ERC) is a refundable tax credit for businesses whose employees were impacted by the COVID-19 Pandemic, as outlined in § 2301 of the CARES Act and § 3111 of the Internal Revenue Code (26 U.S. Code § 3111).

DC Employment Lawyers highlights the various requirements for businesses to qualify for this credit, which depend on when claims were made. It’s imperative that businesses who claimed ERC credit without meeting the requirements strongly consider applying for the Voluntary Disclosure Program (VDP) before the March 22, 2024 deadline. Under the ERC-VDP, three key elements must be addressed: First, businesses must voluntarily repay the ERC, minus 20 percent. Second, they must cooperate with any IRS requests for additional information. Third, signing a closing agreement is necessary. DC Employment Lawyers emphasize the importance of ERC eligibility determination, which involves a step-by-step checklist provided by the IRS. Businesses must accurately document qualified wages paid and classify themselves as large eligible employers if they averaged more than 100 employees. Apart from the VDP option, the IRS offers a special withdrawal process for ERC claims. This option allows taxpayers who have not yet received or deposited an ERC to withdraw their claim without penalties or interest. However, amendments to adjusted employment tax returns require a different procedure.

DC Employment Lawyers underscore the IRS’s commitment to investigating ERC claims, evident in thousands of audits, civil investigations, and criminal probes exceeding $2.9 billion in fraudulent ERCs nationwide. Following the Pandemic, the IRS intensified efforts, deploying fraud strike forces in states like Colorado and New Jersey. These measures address over 700 enforcement actions, with alleged COVID-19 fraud surpassing $830 million, emphasizing the federal government’s stance against pandemic-related fraud.

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