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5 Key Facts About the IRS' ERC Voluntary Disclosure Program for Massachusetts Businesses

Offshore Account Update

Posted on January 31, 2024 |

Continuing its efforts to target fraud under the pandemic-era Employee Retention Credit (ERC), the Internal Revenue Service (IRS) recently announced that it is opening a limited-time ERC Voluntary Disclosure Program (ERC-VDP). While qualifying businesses can use the ERC-VDP to limit their liability, business owners must work with their counsel to ensure that this is the best option before they file.

What Massachusetts Business Owners Need to Know About the ERC-VDP

Here are five key facts about the ERC-VDP for Massachusetts business owners from Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

1. Not All Businesses Qualify to File Under the ERC-VDP

The first thing to know is that not all businesses qualify to file under the ERC-VDP. If your business doesn’t qualify, you will need to work with your counsel to determine what other options you have available. As outlined by the IRS, the criteria for filing under the ERC-VDP include:

  • Your business received an ERC refund, but “[y]ou now think that you were entitled to $0 ERC;”
  • Your business is not currently facing an IRS employment tax audit or criminal tax fraud investigation; and,
  • Your business has not received an ERC disallowance letter from the IRS.

2. Businesses Filing Under the ERC-VDP Must Be Able to Satisfy Their Financial Obligation to the IRS

When filing under the ERC-VDP, businesses must be able to repay the full amount of their ERC refund (or combined ERC refunds), less 20 percent. Businesses that do not have the funds available to repay 80 percent of their total ERC refunds will need to consider other alternatives, such as seeking an installment agreement or offer in compromise.

3. Businesses Filing Under the ERC-VDP Must “Cooperate with Any Requests from the IRS”

As a condition of filing under the ERC-VDP, businesses must agree to “cooperate with any requests from the IRS for more information.” Failure to cooperate can not only lead to denial of a business’s ERC-VDP application, but potentially to additional scrutiny from the IRS as well.

4. Filing Under the ERC-VDP Does Not Guarantee Protection

As the IRS makes clear, businesses can apply for protection under the ERC-VDP. Filing does not guarantee that the IRS will accept a business’s partial return of its ERC refund (or refunds). If a business’s ERC filing or ERC-VDP application raises concerns about criminal tax fraud, it could potentially trigger a criminal investigation.

5. IRS Allegations of IRC Fraud Can Lead to Substantial Exposure

If a business’s voluntary disclosures to the IRS lead to allegations of ERC fraud, this can create substantial exposure. Tax fraud and other federal tax crimes carry six-figure fines as well as the potential for federal imprisonment.

Request a Confidential Consultation with Boston Tax Attorney Kevin E. Thorn

Are you thinking about filing under the ERC-VDP? If so, we strongly encourage you to contact us first to ensure that you are making an informed decision. To request a confidential consultation with Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 617-692-2989 or inquire online today.

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