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The IRS has announced a second Voluntary Disclosure Program for employers to resolve erroneous claims for credit or refund involving the COVID-19 Employee Retention Credit (ERC). Participation in the second ERC Voluntary Disclosure Program is limited to ERC claims filed for the 2021 tax period(s), and cannot be used to disclose and repay ERC money from tax periods in 2020.

The program is designed to help businesses with questionable claims to self-correct and repay the credits they received after filing erroneous ERC claims, many of which were driven by aggressive marketing from unscrupulous promoters.

The first ERC Voluntary Disclosure Program was announced in late December 2023, and ended on March 22, 2024 (Announcement 2024-3, I.R.B. 2024-2, 364). Over 2,600 taxpayers applied to the first program to resolve their improper ERC claims and avoid civil penalties and unnecessary litigation.

The second ERC Voluntary Disclosure Program will allow businesses to correct improper payments at a 15-percent discount, and avoid future audits, penalties and interest.

Procedures for Second Voluntary Disclosure Program

To apply, employers must file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, and submit it through the IRS Document Upload Tool. Employers must provide the IRS with the names, addresses, telephone numbers and details about the services provided by any advisors or tax preparers who advised or assisted them with their claims, and are expected to repay their full ERC claimed, minus the 15-percent reduction allowed through the Voluntary Disclosure Program.

Eligible employers must apply by 11:59 pm local time on November 22, 2024.

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The Department of the Treasury and the IRS released statistics on the Inflation Reduction Act clean energy tax credits for the 2023 tax year. Taxpayers have claimed over $6 billion in tax credits for residential clean energy investments and more than $2 billion for energy-efficient home improvements on 2023 tax returns filed and processed through May 23, 2024.

For the Residential Clean Energy Credit, 1,246,440 returns were filed, with a total credit value of $6.3 billion and an average of $5,084 per return. Specific investments include:

Rooftop solar: 752,300 returns, up to 30 percent of the cost;
Batteries: 48,840 returns, up to 30 percent of the cost.

For the Energy Efficient Home Improvement Credit, 2,338,430 returns were filed, with a total credit value of $2.1 billion and an average of $882 per return. Specific improvements include:

Home insulation: 669,440 returns, up to 30 percent of the cost;
Windows and skylights: 694,450 returns, up to 30 percent of the cost or $600;
Central air conditioners: 488,050 returns, up to 30 percent of the cost or $600;
Doors: 400,070 returns, up to 30 percent of the cost, $250 per door or $500 total;
Heat pumps: 267,780 returns, up to 30 percent of the cost or $2,000;
Heat pump water heaters: 104,180 returns, up to 30 percent of the cost or $2,000.

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Internal Revenue Service Commissioner Daniel Werfel is calling on Congress to maintain the agency’s funding and not make any further cuts to the supplemental funding provided to the agency in the Inflation Reduction Act, using recent successes in customer service and compliance to validate his request.

"The Inflation Reduction Act funding is making a difference for taxpayers, and we will build on these improvements in the months ahead," Werfel said during a July 24, 2024, press teleconference, adding that "for this progress to continue, we must maintain a reliable, consistent annual appropriations for the agency as well as keeping the Inflation Reduction Act funding intact."

During the call, Werfel highlighted a number of improvements to IRS operations that have come about due to the IRA funding, including expansion of online account features (such as providing more digital forms, making it easier to make online payments, and making access in general easier); providing more access to taxpayers wanting face-to-face assistance (including a 37 percent increase in interactions at taxpayer assistance centers); IT modernization; and the collection of more than $1 billion in taxes due form high wealth individuals.

Werfel did highlight an area where he would like to see some improvements, including the number of taxpayers who have activated their online account.

While he did not have a number of how many taxpayers have activated their accounts so far, he said that “"we are nowhere near where we have the opportunity to be,"” adding that as functionality improves and expands, that will bring more taxpayers in to use their online accounts and other digital services.

He also noted that online accounts will be a deterrent for scams, and it will provide taxpayers with the information they need to not be fooled by scammers.

“We see the online account as a real way to test these scams and schemes because taxpayers will have a single source of truth about whether they actually owe a debt, whether the IRS is trying to reach them, and also information we can push out to taxpayers more regularly if they sign up and opt in for it on the latest scams and schemes,” Werfel said.

By Gregory Twachtman, Washington News Editor

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The IRS has intensified its efforts to scrutinize claims for the Employee Retention Credit (ERC), issuing five new warning signs of incorrect claims. These warning signs, based on common issues observed by IRS compliance teams, are in addition to seven problem areas previously highlighted by the agency. Businesses with pending or previously approved claims are urged to carefully review their filings to confirm eligibility and ensure credits claimed do not include any of these twelve warning signs or other mistakes. The IRS emphasizes the importance of consulting a trusted tax professional rather than promoters to ensure compliance with ERC rules.

The newly identified issues include essential businesses claiming ERC despite being fully operational, unsupported government order suspensions, misreporting wages paid to family members, using wages already forgiven under the Paycheck Protection Program, and large employers incorrectly claiming wages for employees who provided services. The IRS plans to deny tens of thousands of claims that show clear signs of being erroneous and scrutinize hundreds of thousands more that may be incorrect. In addition, the IRS announced upcoming compliance measures and details about reopening the Voluntary Disclosure Program, aimed at addressing high-risk ERC claims and processing low-risk payments to help small businesses with legitimate claims.

IRS Commissioner Danny Werfel emphasized the agency’s commitment to pursuing improper claims and increasing payments to businesses with legitimate claims. Promoters lured many businesses into mistakenly claiming the ERC, leading to the IRS digitizing and analyzing approximately 1 million ERC claims, representing over $86 billion. The IRS urges businesses to act promptly to resolve incorrect claims, avoiding future issues such as audits, repayment, penalties, and interest. Taxpayers should recheck their claims with the help of trusted tax professionals, considering options such as the ERC Withdrawal Program or amending their returns to correct overclaimed amounts.

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The IRS, in collaboration with state tax agencies and the national tax industry, has initiated a new effort to tackle the rising threat of tax-related scams. This initiative, named the Coalition Against Scam and Scheme Threats (CASST), was launched in response to a significant increase in fraudulent activities during the most recent tax filing season. These scams have targeted both individual taxpayers and government systems, seeking to exploit vulnerabilities for financial gain.

CASST will focus on three primary objectives: enhancing public outreach and education to alert taxpayers to emerging threats, developing new methods to identify fraudulent returns at the point of filing, and improving the infrastructure to protect taxpayers and the integrity of the tax system. This initiative builds on the successful framework of the Security Summit, which was launched in 2015 to combat tax-related identity theft. While the Security Summit made significant progress in reducing identity theft, CASST aims to address a broader range of scams, reflecting the evolving tactics of fraudsters.

The coalition has received widespread support, with over 60 private sector groups, including leading software and financial companies, joining the effort. Key national tax professional organizations are also participating, all committed to strengthening the security of the tax system.

Among the measures CASST will implement are enhanced validation processes for tax preparers, including improvements to the Electronic Filing Identification Number (EFIN) and Preparer Tax Identification Number (PTIN) systems. The coalition will also target the issue of ghost preparers, who prepare tax returns for a fee without proper disclosure, leading to inflated refunds and significant revenue losses.

In addition to these technical improvements, CASST will address specific scams, such as fraudulent claims for tax credits like the Fuel Tax Credit. By the 2025 filing season, CASST aims to have new protections in place, bolstering defenses across both public and private sectors to make it more difficult for scammers to exploit the tax system. This coordinated effort seeks to protect taxpayers and ensure the integrity of the nation’s tax system.

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The Internal Revenue Service will be processing about 50,000 "low-risk" Employee Retention Credit claims, and it will be shifting the moratorium dates on processing.

The Internal Revenue Service will be processing about 50,000 "low-risk"Employee Retention Credit claims, and it will be shifting the moratorium dates on processing.

"The IRS projects payments will begin in September with additional payments going out in subsequent weeks," the agency said in an August 8, 2024, statement."The IRS anticipates adding another large block of additional low-risk claims for processing and payment in the fall."

The agency also announced that it is shifting the moratorium period on processing new claims. Originally, the agency was not processing claims that were filed after September 14, 2023. It is now going to process claims filed between September 14, 2023, and January 31, 2024.

"Like the rest of the ERC inventory, work will focus on the highest and lowest risk claims at the top and bottom end of the spectrum," the IRS said. "This means there will be instances where the agency will start taking actions on claims submitted in this time period when the agency has seen a sound basis to pay or deny any refund claim."

The agency also said it has sent out "28,000 disallowance letters to businesses whose claims showed a high risk of being incorrect," preventing up to $5 billion in improper payments. It also has "thousands of audits underway, and 460 criminal cases have been initiated" with potentially fraudulent claims worth nearly $7 billion. Thirty-seven investigations have resulted in federal charges, with 17 resulting in convictions.

Businesses that receive a denial letter will have the ability to appeal the decision.

The agency also offered some other updates on the ERC program, including:

The claim withdrawal process for unprocessed ERC has led to more than 7,300 withdrawing $677 million in claims;
The voluntary disclosure program received more than 2,600 applications from ERC recipients that disclosed $1.09 billion in credits; and
The IRS Office of Promoter Investigations has received "hundreds" of referrals about suspected abusive tax promoters and preparers improperly promoting the ability to claim the ERC.

"The IRS is committed to continuing out work to resolve this program as Congress contemplates further action, both for the good of legitimate businesses and tax administration," IRS Commissioner Daniel Werfel said in the statement.

By Gregory Twachtman, Washington News Editor

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The IRS has announced substantial progress in its ongoing efforts to modernize tax administration, emphasizing a shift towards digital interactions and enhanced measures to combat tax evasion. This update, part of a broader 10-year plan supported by the Inflation Reduction Act, reflects the agency's commitment to improving taxpayer services and ensuring fairer compliance.

The IRS’s push for digital transformation has seen significant advancements, allowing taxpayers to conduct nearly all interactions with the agency online. This initiative aims to reduce the reliance on paper submissions, expedite tax processing, and improve overall efficiency. In 2024 alone, the IRS introduced extended hours at Taxpayer Assistance Centers across the country, particularly benefiting rural and underserved communities. The agency also reported a notable increase in face-to-face interactions, with a 37 percent rise in contacts during the 2024 filing season.

In parallel with these service improvements, the IRS has ramped up efforts to disrupt complex tax evasion schemes. Leveraging advanced data science and technology, the agency has focused on high-income individuals and entities employing sophisticated financial maneuvers to avoid taxes. Among the IRS’s new measures is a moratorium on processing Employee Retention Credit claims to prevent fraud, alongside initiatives targeting abusive use of partnerships and improper corporate practices.

The IRS also highlighted its progress in eliminating paper filings through the introduction of the Document Upload Tool, which allows taxpayers to submit documents electronically. This tool, along with upgraded scanning and mail-sorting equipment, is expected to significantly reduce the volume of paper correspondence, potentially replacing millions of paper documents each year. These technological upgrades are part of the IRS’s broader goal to create a fully digital workflow, thereby speeding up refunds and improving service accuracy.

Additionally, the IRS has launched new programs to ensure taxpayers are informed about and can claim eligible credits and deductions. This includes outreach efforts related to the Child Tax Credit and the Earned Income Tax Credit, aiming to bridge the gap for eligible taxpayers who may not have claimed these benefits. These initiatives underline the IRS's dedication to a more equitable tax system, ensuring that all taxpayers have access to the credits and services they are entitled to while maintaining robust compliance standards.

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The Electronic Federal Tax Payment System (EFTPS) allows individuals and businesses to make tax payments by telephone, personal computer or through the Internet.

Paperless

EFTPS is one of the most user-friendly programs developed by the IRS. EFTPS is totally paperless. Everything is done by telephone or computer. Because it's electronic, it's available 24 hours a day, seven days a week.

You make your tax payments electronically by:

· Calling EFTPS; or

· Using special computer software or the Internet.

Who can use EFTPS

EFTPS is available to businesses and individuals but businesses have more options.

Businesses: If your total deposits of federal taxes are more than $200,000 each year, you must use EFTPS. If not, you can still use EFTPS but you're not required to.

To calculate the $200,000 threshold, you have to include every federal tax your business pays, such as payroll, income, excise, social security, railroad retirement, and any other federal taxes.

The IRS wants businesses to use EFTPS and makes it difficult to stop using it. Once you meet the $200,000 threshold, you have to continue using EFTPS even if your annual tax deposits fall below $200,000 in the future.

Individuals: Individuals can also use EFTPS. Many of the individuals using EFTPS are making quarterly estimated tax payments but it's also available to people paying federal estate and gift taxes and installment payments.

How EFTPS works

There are two versions of EFTPS: direct and through a financial institution.

Direct: EFTPS-Direct is just what the name suggests. You access EFTPS directly - by telephone or computer - and make your tax payments. You tell EFTPS when you want to deposit your taxes and on that date EFTPS tells your bank to transfer the funds from your account to the IRS. At the same time, the IRS updates your payroll tax records to reflect the deposit.

Example. Your payroll taxes are due on the 15th. You have to contact EFTPS by 8PM at least one day before your tax due date. You either call EFTPS or log-on using special software or through the Internet. You enter your payment and EFTPS automatically debits your bank account and transfers the funds to the IRS on the date you indicate.

If you're a business, you can schedule your tax deposits up to 120 days before the due date. Individuals can schedule tax deposits up to 365 days before the due date.

Through a financial institution: You can also access EFTPS through a bank or credit union. Instead of contacting EFTPS directly and making your tax payments, your bank does it for you. Not all banks and credit unions participate in EFTPS so you have to check with your financial institution.

Only businesses can use EFTPS through a financial institution. If you're an individual and you want to use EFTPS, you have to use it directly. Also, while EFTPS-Direct is free, some financial institutions charge a fee for accessing EFTPS.

Getting started

To access EFTPS, you have to enroll. Your tax advisor can help you navigate the enrollment process and, once you're part of EFTPS, he or she can make the payments for you.

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The responsibility for remitting federal tax payments to the IRS in a timely manner can be overwhelming for the small business owner -- the deadlines seem never ending and the penalties for late payments can be stiff. However, many small business owners may find that participating in the IRS's EFTPS program is a convenient, timesaving way to pay their federal taxes.

The Electronic Federal Tax Payment System (EFTPS) is a simple way for businesses to make their federal tax payments. It is easy to use, fast, convenient, secure and accurate. It also saves business owners time and money in making federal tax payments because there are no last minute trips to the bank, no waiting lines, no envelopes, stamps, couriers, etc. And best of all, tax payments are initiated right from your office!

What is the EFTPS?

EFTPS is an electronic tax payment system through which businesses can make all of their federal tax deposits or payments. The system is available 24 hours a day, seven days a week for businesses to make their tax payments either through the use of their own PC, by telephone, or through a program offered by a financial institution.

What federal tax payments are covered by EFTPS?

Some taxpayers mistakenly assume that EFTPS applies only to the deposit of employment taxes. EFTPS has much broader reach. It can be used to make tax payments electronically for a long list of payment obligations:

Form 720, Quarterly Federal Excise Tax Return;
Form 940, Employer's Annual Federal Unemployment Tax (FUTA) Return;
Form 941, Employer's Quarterly Federal Tax Return;
Form 943, Employer's Annual Tax Return For Agricultural Employees;
Form 945, Annual Return of Withheld Federal Income Tax;
Form 990-C, Farmer's Cooperative Association Income Tax Return;
Form 990-PF, Return of Private Foundation;
Form 990-T, Exempt Organization Business Income Tax Return Section 4947(a)(1) Charitable Trust Treated as Private Foundation;
Form 1041, Fiduciary Income Tax Return;
Form 1042, Annual Withholding Tax Return for U.S. Sources of Income for Foreign Persons;
Form 1120, U.S. Corporation Income Tax Return; and
Form CT-1, Employer's Annual Railroad Retirement Tax Return.

How can I get started using EFTPS?

To enroll in EFTPS, the taxpayer must complete IRS Form 9779, Business Enrollment Form, and mailing it to the EFTPS Enrollment Center. To obtain a copy of IRS Form 9779 a taxpayer or practitioner can call EFTPS Customer Service at 1-800-945-8400 or 1-800-555-4477. The enrollment form may also be requested from the IRS Forms Distribution Center at1-800-829-3676.

After you complete and mail the enrollment form, EFTPS processes the enrollment and sends you a Confirmation Packet, which includes a step-by-step Payment Instruction Booklet. You will also receive a PIN under separate cover. Once the Confirmation Packet and the PIN are received, you can begin to make tax payments electronically.

What flexibility is available within the EFTPS for payment options?

There are two primary ways to make payment under EFTPS - directly to EFTPS or through a financial institution. If you wish to make payments directly to EFTPS, the "ACH debit method" should be selected on the enrollment form. Deposits and payments are made using this method by instructing EFTPS to move funds from the business bank account to the Treasury's account on a date you designate. You can instruct EFTPS by either calling a toll-free number, and using the automated telephone system, or by using a PC to initiate the payment.

If you instead elect to make payments through a financial institution, the "ACH credit method" should be chosen on the enrollment form. This method works by using a payment system offered by the financial institution through which you instruct the institution to electronically move funds from your account to a Treasury account.

Although the ACH debit and the ACH credit methods are the primary payment methods for EFTPS, a taxpayer may also choose the Same Day Payment Method. You should contact your financial institution to determine if it can make a same day payment.

If I provide the IRS with access to my bank account, can it access my account for any other purposes?

It is important to note you retain total control of when a payment is made under EFTPS because you initiate the process in all instances. In addition, at no time does the government or any other party have access to your account from which the deposits are made. The only way to authorize deposits or payments from your account is through use of the PIN that is given to you upon enrollment.

Many businesses have recognized the convenience of voluntary participation in the IRS's EFTPS program. If you are interested in discussing whether your business would also benefit from this program, please contact the office for a consultation.

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