IRS ERC Audits & Voluntary Compliance Program
What Is the Voluntary Compliance Program (VCI)?
The IRS has introduced the Voluntary Compliance Program (VCI) for businesses that filed for the Employee Retention Credit (ERC) and believe their claim was inaccurate. This program allows companies to correct mistakes, whether due to their own errors or because they relied on a professional who provided incorrect information. Here’s how to proceed if you find yourself in this situation.
Steps to Correct Your ERC Claim
1. Submit an Application to the IRS
To participate in the VCI program, you must file an application that outlines how the ERC credit was originally calculated, along with additional details requested by the IRS. This form must be signed under penalty of perjury, so accuracy is crucial. It’s wise to consult an experienced attorney who understands IRS audits to ensure you provide the correct information.
2. Return 85% of the ERC Credit Received
The IRS requires that 85% of the ERC credit be returned. They assume that the remaining 15% went to a professional who helped process your claim. If you have already spent the funds and now realize the claim was in error, you’ll still need to return this amount to the government.
3. Cooperate with IRS Investigations
As part of the VCI program, you must agree to cooperate with the IRS in any current or future investigations. If you hired a professional who inaccurately processed your claim, they might have done so for other clients as well. The IRS may request your cooperation to gather information about broader instances of fraud.
4. Sign a Closing Agreement
A closing agreement is a formal settlement between you and the IRS that summarizes the facts of your case. It will include details such as the amount of the credit received, the wages reported, and any discrepancies. This agreement is also signed under penalty of perjury, so it’s vital that the information is accurate.
Why Professional Assistance Matters
If you receive notice of an IRS audit or investigation, seek professional assistance immediately. Accurate information and a strategic approach are crucial from the outset to prevent further complications, including potential criminal investigations.
Need Support?
Facing an IRS audit or need help with the VCI program? Contact John Milikowsky at Milikowsky Tax Law for expert guidance on managing your ERC compliance.
