IRS Announces Limited-Time Repayment Program for Faulty Employee Retention Credit Applications

The Internal Revenue Service has just published Announcement 2023-3 which allows companies to repay Employee Retention Credit (“ERC”) funds that they received from the federal government based on a defective application.  The Service is offering this program to mitigate the impact on businesses who were the victims of unscrupulous promoters of ERC applications.  The limited time program ends on March 22, 2024.  The program allows eligible participating companies to resolve problems associated with a faulty application by repaying 80% of the amount they received, without interest or penalties.

Eligible companies must:

• Not be under criminal investigation or have received a notice that the Service intends to commence such an investigation;
• Not be undergoing an employment tax examination for the periods for which the credit must be repaid; and
• Have not received a notice and demand for repayment of ERC funds.

This limited-time program will require disclosure of information of the provider who prepared the company’s ERC application as well as a formal Closing Agreement, and may require amendments to previously filed payroll tax returns.

If your company received ERC funds, and you have reason to believe that the company may not have been eligible to receive the funds, or you are concerned that the ERC application may have been inaccurate, please contact an attorney or a member of the Gallagher & Kennedy tax department for a consultation concerning whether you should consider using this limited-time program offered by the Service.

Otto S. Shill III is a Certified Tax Specialist by the State Bar of Arizona Board of Legal Specialization, Shill has helped individuals, business owners, and employers comply with and plan for laws and regulations related to federal and state taxation, employee benefits, and executive compensation. He has assisted clients with audits, investigations, and regulatory disputes related to these areas for over 40 years, and advises businesses and their owners regarding business transactions and long-term business succession and estate planning.