Voluntary Disclosure Program provides employers with an option for ERC forgiveness

Understanding Delays in Employee Retention Credit Processing by the IRS and How Employers Can Navigate the Voluntary Disclosure Program

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The Employee Retention Credit (ERC) has been a lifeline for many businesses struggling to weather the economic challenges brought on by the COVID-19 pandemic. However, delays in processing ERC claims by the Internal Revenue Service (IRS) have left many employers frustrated and seeking answers. In this article, we’ll explore the reasons behind these delays, the IRS’ ERC forgiveness program, and how businesses can navigate the process with assistance from Rockerbox.

1. Delays in ERC Processing by the IRS

The IRS has faced unprecedented challenges in processing the overwhelming volume of ERC claims submitted by employers across the country. Factors contributing to these delays include:

  • Increased workload: The sheer volume of ERC claims submitted by businesses of all sizes has overwhelmed IRS resources, leading to processing delays.
  • Complex eligibility criteria: Determining eligibility for the ERC involves intricate calculations and documentation requirements, further complicating the processing timeline.
  • Manual review processes: Due to the complexity of ERC claims, many require manual review by IRS personnel, leading to longer processing times.
  • The IRS placed a “moratorium” on all ERC processing starting on September 14, 2023.
  • Depending on the agent contacted via the toll-free number, processing has begun on ERC claims that were received before the September 14th moratorium.   There does not appear to be a timeline for processing ERC claims that were submitted to the IRS after the September 14th moratorium (and before the proposed deadline of January 31, 2024).

2. IRS’ ERC Voluntary Disclosure Program 

If businesses do not meet the withdrawal criteria, but claimed the credit and are worried about the money received, they should consider applying for the IRS’s Voluntary Disclosure Program (VDP) before the March 22 deadline. In short, this program allows businesses to return 80% of the claimed ERC amount in exchange for the IRS not examining the ERC claim in the future.

Of course, certain eligibility requirements apply to the VDP, and the program is tailored to companies that received an ERC refund but now believe they were entitled to $0. If a VDP application is approved by the IRS, the company is required to:

  • voluntarily pay back the ERC, minus 20% (i.e., less than what was received);
  • cooperate with any requests from the IRS for more information; and
  • sign a closing agreement.

If you claimed and received the ERC, but determined you were ineligible and need to repay the ERC, Rockerbox recommends reviewing whether a VDP application is right for you and taking immediate action to meet the upcoming March 22 deadline.

3. IRS Toll-Free Number for ERC Updates

For employers seeking updates on previously submitted ERC claims or forgiveness applications, the IRS has established a dedicated toll-free number: [1-800-829-4933; select language and then “Option 3”]. Employers can contact this number to inquire about the status of their ERC-related requests and receive assistance from IRS representatives.

In conclusion, while delays in ERC processing by the IRS have posed challenges for employers, the introduction of the ERC forgiveness program offers a pathway to expedited resolution. By leveraging the expertise of Rockerbox and utilizing resources such as the IRS toll-free number, employers can navigate the ERC forgiveness process with confidence and ensure compliance with regulatory requirements.