2024 Tax Calendar

To help you remember the important 2024 deadlines, refer to this summary of when various tax-related forms, payments and other actions are due. Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.

Date	Deadline for
January 31	Individuals: Filing a 2023 income tax return (Form 1040 or Form 1040-SR) and paying tax due, to avoid penalties for underpaying the January 16 installment of estimated taxes. Businesses: Providing Form 1098, Form 1099-MISC (except for those that have a February 15 deadline), Form 1099-NEC and Form W-2G to recipients. Employers: Providing 2023 Form W-2 to employees. Employers: Reporting Social Security and Medicare taxes and income tax withholding for fourth quarter 2023 (Form 941) if all associated taxes due weren’t deposited on time and in full. Employers: Filing a 2023 return for federal unemployment taxes (Form 940) and paying any tax due if all associated taxes due weren’t deposited on time and in full. Employers: Filing 2023 Form W-2 (Copy A) and transmittal Form W-3 with the Social Security Administration.
February 12	Individuals: Reporting January tip income of $20 or more to employers (Form 4070). Employers: Reporting Social Security and Medicare taxes and income tax withholding for fourth quarter 2023 (Form 941) if all associated taxes due were deposited on time and in full. Employers: Filing a 2023 return for federal unemployment taxes (Form 940) if all associated taxes due were deposited on time and in full.
February 15	Individuals: Filing a new Form W-4 to continue exemption for another year if you claimed exemption from federal income tax withholding in 2023. Businesses: Providing Form 1099-B, 1099-S and certain Forms 1099-MISC (those in which payments in Box 8 or Box 10 are being reported) to recipients. Employers: Depositing Social Security, Medicare and withheld income taxes for January if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for January if the monthly deposit rule applies.
February 28	Businesses: Filing Form 1098, Form 1099 (other than those with a January 31 deadline), Form W-2G and transmittal Form 1096 for interest, dividends and miscellaneous payments made during 2023. (Electronic filers can defer filing to March 31.)
March 11	Individuals: Reporting February tip income of $20 or more to employers (Form 4070).
March 15	Calendar-year S corporations: Filing a 2023 income tax return (Form 1120-S) or filing for an automatic six-month extension (Form 7004) and paying any tax due. Calendar-year partnerships: Filing a 2023 income tax return (Form 1065 or Form 1065-B) or requesting an automatic six-month extension (Form 7004). Employers: Depositing Social Security, Medicare and withheld income taxes for February if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for February if the monthly deposit rule applies.
April 1	Employers: Electronically filing 2023 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and Form W-2G.
April 10	Individuals: Reporting March tip income of $20 or more to employers (Form 4070).
April 15	Individuals: Filing a 2023 income tax return (Form 1040 or Form 1040-SR) or filing for an automatic six-month extension (Form 4868) and paying any tax due. (See June 17 for an exception for certain taxpayers.) Individuals: Paying the first installment of 2024 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. Individuals: Making 2023 contributions to a traditional IRA or Roth IRA (even if a 2023 income tax return extension is filed). Individuals: Making 2023 contributions to a SEP or certain other retirement plans (unless a 2023 income tax return extension is filed). Individuals: Filing a 2023 gift tax return (Form 709) or filing for an automatic six-month extension (Form 8892) and paying any gift tax due. Filing for an automatic six-month extension (Form 4868) to extend both Form 1040 and Form 709 if no gift tax is due. Household employers: Filing Schedule H, if wages paid equal $2,600 or more in 2023 and Form 1040 isn’t required to be filed. For those filing Form 1040, Schedule H is to be submitted with the return and is thus extended to the due date of the return. Calendar-year trusts and estates: Filing a 2023 income tax return (Form 1041) or filing for an automatic five-and-a-half-month extension (Form 7004) (six-month extension for bankruptcy estates) and paying any income tax due. Calendar-year corporations: Filing a 2023 income tax return (Form 1120) or filing for an automatic six-month extension (Form 7004) and paying any tax due. Calendar-year corporations: Paying the first installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Employers: Depositing Social Security, Medicare and withheld income taxes for March if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for March if the monthly deposit rule applies.
April 30	Employers: Reporting Social Security and Medicare taxes and income tax withholding for first quarter 2024 (Form 941) and paying any tax due if all associated taxes due weren’t deposited on time and in full.
May 10	Individuals: Reporting April tip income of $20 or more to employers (Form 4070). Employers: Reporting Social Security and Medicare taxes and income tax withholding for first quarter 2024 (Form 941) if all associated taxes due were deposited on time and in full.
May 15	Employers: Depositing Social Security, Medicare and withheld income taxes for April if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for April if the monthly deposit rule applies. Calendar-year exempt organizations: Filing a 2023 information return (Form 990, Form 990-EZ or Form 990-PF) or filing for an automatic six-month extension (Form 8868) and paying any tax due. Calendar-year small exempt organizations (with gross receipts normally of $50,000 or less): Filing a 2023 e-Postcard (Form 990-N) if not filing Form 990 or Form 990-EZ.
June 10	Individuals: Reporting May tip income of $20 or more to employers (Form 4070).
June 17	Individuals: Filing a 2023 individual income tax return (Form 1040 or Form 1040-SR) or filing for a four-month extension (Form 4868), and paying any tax, interest and penalties due, if you live outside the United States or you serve in the military outside the United States and Puerto Rico. Individuals: Paying the second installment of 2024 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. Calendar-year corporations: Paying the second installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Employers: Depositing Social Security, Medicare and withheld income taxes for May if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for May if the monthly deposit rule applies.
July 10	Individuals: Reporting June tip income of $20 or more to employers (Form 4070).
July 15	Employers: Depositing Social Security, Medicare and withheld income taxes for June if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for June if the monthly deposit rule applies.
July 31	Employers: Reporting Social Security and Medicare taxes and income tax withholding for first quarter 2024 (Form 941) and paying any tax due if all associated taxes due weren’t deposited on time and in full. Employers: Filing a 2023 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or requesting an extension.
August 12	Individuals: Reporting July tip income of $20 or more to employers (Form 4070). Employers: Reporting Social Security and Medicare taxes and income tax withholding for second quarter 2024 (Form 941) if all associated taxes due were deposited on time and in full.
August 15	Employers: Depositing Social Security, Medicare and withheld income taxes for July if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for July if the monthly deposit rule applies.
September 10	Individuals: Reporting August tip income of $20 or more to employers (Form 4070).
September 16	Individuals: Paying the third installment of 2024 estimated taxes (Form 1040-ES), if not paying income tax through withholding or not paying sufficientincome tax through withholding. Calendar-year corporations: Paying the third installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Calendar-year S corporations: Filing a 2023 income tax return (Form 1120-S) and paying any tax, interest and penalties due, if an automatic six-month extension was filed. Calendar-year S corporations: Making contributions for 2023 to certain employer-sponsored retirement plans if an automatic six-month extension was filed. Calendar-year partnerships: Filing a 2023 income tax return (Form 1065 or Form 1065-B) if an automatic six-month extension was filed. Employers: Depositing Social Security, Medicare and withheld income taxes for August if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for August if the monthly deposit rule applies.
September 30	Calendar-year trusts and estates: Filing a 2023 income tax return (Form 1041) if an automatic five-and-a-half-month extension was filed and paying any tax, interest and penalties due.
October 10	Individuals: Reporting September tip income of $20 or more to employers (Form 4070).
October 15	Individuals: Filing a 2023 income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico) and paying any tax, interest and penalties due. Individuals: Making contributions for 2023 to certain existing retirement plans or establishing and contributing to a SEP for 2023 if an automatic six-month extension was filed. Individuals: Filing a 2023 gift tax return (Form 709) and paying any tax, interest and penalties due if an automatic six-month extension was filed. Calendar-year C corporations: Filing a 2023 income tax return (Form 1120) if an automatic six-month extension was filed and paying any tax, interest and penalties due. Calendar-year C corporations: Making contributions for 2023 to certain employer-sponsored retirement plans if an automatic six-month extension was filed. Calendar-year bankruptcy estates: Filing a 2023 income tax return (Form 1041) if an automatic six-month extension was filed and paying any tax, interest and penalties due. Employers: Depositing Social Security, Medicare and withheld income taxes for September if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for September if the monthly deposit rule applies.
October 31	Employers: Reporting Social Security and Medicare taxes and income tax withholding for third quarter 2024 (Form 941) and paying any tax due if all associated taxes due weren’t deposited on time and in full.
November 12	Individuals: Reporting October tip income of $20 or more to employers (Form 4070). Employers: Reporting Social Security and Medicare taxes and income tax withholding for third quarter 2024 (Form 941) if all associated taxes due were deposited on time and in full.
November 15	Exempt organizations: Filing a 2023 information return (Form 990, Form 990-EZ or Form 990-PF) if a six-month extension was filed and paying any tax, interest and penalties due. Employers: Depositing Social Security, Medicare and withheld income taxes for October if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for October if the monthly deposit rule applies.
December 10	Individuals: Reporting November tip income of $20 or more to employers (Form 4070).
December 16	Calendar-year corporations: Paying the fourth installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Employers: Depositing Social Security, Medicare and withheld income taxes for November if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for November if the monthly deposit rule applies.

Yeo & Yeo is pleased to announce the promotion of Chelsea Meyer, CPA, to Senior Manager.

“With a wealth of knowledge and unwavering passion for her work, Chelsea consistently strives to provide top-level attention to her clients,” says David Jewell, Principal and Tax & Consulting Service Line Leader. “Her expertise in trusts and estates, coupled with her proficiency in closely held businesses, positions her as an excellent resource for clients and staff.”

Since joining the firm in 2013 as a staff accountant, Meyer has developed specializations in tax planning and preparation for individuals, businesses, and trusts and estates, as well as business advisory services and financial statement compilations and reviews. She is a member of the firm’s Nonprofit Services Group and the Trust & Estate Services Group. As a QuickBooks Certified ProAdvisor, Meyer also assists clients with implementing and efficiently using their accounting systems. She holds a Master of Science in accounting from Grand Valley State University. She is a member of the Grand Rapids Accounting & Financial Women’s Alliance, Western Michigan Estate Planning Council, and Women in Networking of Kalamazoo. In the community, she is a member of Women Who Care of Kalamazoo County. She is the former treasurer of the Junior League of Ann Arbor and a past member of the Child Care Network finance committee.

“I enjoy helping my clients break a seemingly large number of tasks into actionable steps and make sense of things that can sometimes be very challenging,” Meyer said. “In my role as a senior manager, I am eager to elevate my impact in mentoring staff and assisting clients in aligning their financials to their business goals.”

Engaging in a merger or acquisition (M&A) can help your business grow, but it also can be risky. Buyers must understand the strengths and weaknesses of their intended partners or acquisition targets before entering the transactions.

A robust due diligence process does more than assess the reasonableness of the sales price. It also can help verify the seller’s disclosures, confirm the target’s strategic fit, and ensure compliance with legal and regulatory frameworks — before and after the deal closes. Here’s an overview of the three phases of the due diligence process.

1. Defining the scope

Before the due diligence process begins, it’s important to establish clear objectives. The work during this phase should include a preliminary assessment of the target’s market position and financial statements, as well as the expected benefits of the transaction. You should also identify the inherent risks of the transaction and document how due diligence efforts will verify, measure and mitigate the buyer’s potential exposure to these risks.

2. Conducting due diligence

The primary focus during this step is evaluating the target company’s financial statements, tax returns, legal documents and financing structure. Additionally, contingent liabilities, off-balance-sheet items and the overall quality of the company’s earnings will be scrutinized. Budgets and forecasts may be analyzed, especially if management prepared them specifically for the M&A transaction. Interviews with key personnel and frontline employees can help a prospective buyer fully understand the company’s operations, culture and value.

Artificial intelligence (AI) is transforming how companies conduct due diligence. For example, AI can analyze vast quantities of customer data quickly and efficiently. This can help identify critical trends and risks in large data sets, such as those related to regulatory compliance or fraud.

If a target company maintains an extensive database of customer contracts, AI can analyze every document for the scope of the relationship, contractual obligations, key clauses and the consistency of the terminology used in each document. Sophisticated solutions can analyze the target’s financial records and even produce post-acquisition financial statement forecasts.

3. Structuring the deal

Information gathered during due diligence can help the parties develop the terms of the proposed transaction. For example, issues unearthed during the due diligence process — such as excessive customer turnover, significant related-party transactions or mounting bad debts — could warrant a lower offer price or an earnout provision (where a portion of the purchase price is contingent on whether the company meets future financial benchmarks). Likewise, cultural problems — such as employee resistance to the deal or incongruence with the existing management team’s long-term vision — could cause a buyer to revise the terms or walk away from the deal altogether.

We can help

Comprehensive financial due diligence is the cornerstone of a successful M&A transaction. If you’re thinking about merging with a competitor or buying another company, contact us to help you gather the information needed to minimize the risks and maximize the benefits of a proposed transaction.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act of 2019) and the SECURE 2.0 Act of 2022 (collectively, SECURE) enacted a new mandate that, starting in 2024, long-term, part-time (LTPT) employees must be allowed to make salary deferrals into their employer’s 401(k) plan.

The systems used by many 401(k) plan service providers are not ready for the required implementation starting with the first plan year beginning on or after January 1, 2024 (i.e., January 1, 2024, for calendar year plans).

Some executives may view this change as an issue that does not require their attention and that will be handled by their human resources (HR) staff and the 401(k) plan service providers. But not complying with the rules might be costly for the employer if corrective contributions for LTPT employees who were not allowed to participate are required, along with ancillary costs.

New Mandate

For decades, tax-qualified retirement plans could exclude employees who work fewer than 1,000 hours of service per year, even if the employee worked for the employer for many years. Employees who worked over 1,000 hours generally could not be excluded from the plan (with certain non-hours-based exceptions). To improve access to workplace retirement savings plans, the 2019 SECURE Act required 401(k) plans to allow employees who have worked at least 500 hours in three consecutive years (based on employment with the employer from January 1, 2021, onward) to make elective deferrals to the plan. Thus, if an employee had 500 hours of service in 2021, 2022, and 2023 (but never had 1,000 hours of service per year), that employee must be allowed to make salary deferrals into the employer’s 401(k) plans starting with the first plan year beginning on or after January 1, 2024. For plan years beginning in 2025 and later, SECURE 2.0 of 2022 reduces the three-year measurement period to two years.

On November 27, 2023, the IRS issued proposed regulations that employers can rely on to apply the LTPT employee rules until the final rules are issued.

An Example of How the Rules Work

Let’s assume a calendar year 401(k) plan has a requirement that employees must be age 21 and complete 1,000 of service before being eligible for plan participation that includes making elective deferrals and receiving company matching contributions. Starting in 2024, some employees who do not meet the 1,000-hour service requirement might be eligible to make salary deferrals. The employer is not required to make matching contributions or any other employer contributions for LTPT employees who make salary deferrals.

Counting the hours worked to determine plan eligibility is not new and the rules are essentially the same for counting 1,000 hours and 500 hours. Hours for new employees should be counted for 12 months following their date of hire, but the measurement period can be switched to the plan year for administrative ease. However, while the 1,000-hour requirement is a standalone measure for each year, the 500-hour count is relevant for two or three years, depending on the plan year under evaluation. Therefore, for a calendar year plan beginning January 1, 2024, the hours are counted for 2021, 2022, and 2023. Any employee whose count is 500 or more but less than 1,000 in each of those three years should be allowed to make elective deferrals into the calendar year plan as of January 1, 2024.

As a further example, assume Susan was hired on June 1, 2021, by an employer that sponsors a calendar year 401(k) plan. On December 31, 2021, the first plan year end after Susan’s hire date, the employer switches her hours worked to be measured based on the plan year. Year One for Susan runs from June 1, 2021, through May 31, 2022. Year Two for Susan runs from January 1, 2022, through December 31, 2022, and Year Three for Susan runs from January 1, 2023, through December 31, 2023. Susan worked 500 hours in Year One, 680 hours in Year Two, and 520 hours in Year Three. Therefore, effective January 1, 2024, she should be allowed to make elective deferrals under the plan. Note that the switch from counting hours based on Susan’s date of hire anniversary to using the plan year as her eligibility computation period causes the hours she worked from January 1, 2022, through May 31, 2022, to be double counted in both her first and second year.

Even though vesting schedules have no relevance to Susan’s elective deferrals (since she is always 100% vested in her own contributions), she will receive a year of vesting credit for each year after 2021 that she works at least 500 hours (i.e., Susan has three years vesting credit if she became eligible for employer contributions in 2024). This would be significant if she subsequently becomes eligible to participate in the plan for a reason that is not solely on account of being an LTPT employee. Once an individual is eligible for the plan, they remain eligible and do not have to requalify to participate.

For the 2025 plan year, the period from June 1, 2022, through May 31, 2022, will drop out of the determination. Additionally, the period from January 1, 2022, through December 31, 2022, will drop out of the determination because of the change made by SECURE 2.0 to look back only two years instead of three. Accordingly, Susan’s 2025 plan eligibility as an LTPT employee will be based on her hours worked during the 2023 and 2024 plan years.

The future years’ determination is complicated, especially if the employee’s hours worked fluctuate above and below 1,000 hours.

Why Should I be Concerned?

While employers are not required to match the LTPT employee deferrals and LTPT employees are excluded from the annual tests that otherwise apply to all employees (e.g., coverage, nondiscrimination, and top-heavy requirements), there might be some increased cost to the plan sponsor for including LTPT employees in the 401(k) plan. Employers should consider the following potential increases in plan cost due to the new LTPT employee mandate.

Increased Plan Audit Expense -The additional participants due to LTPT employee status must be counted when determining if the 401(k) plan must have an annual independent audit of the plan’s financials. Starting with the 2023 plan year, 401(k) plans that have more than 100 participant accounts as of the first day of the 2023 plan year must have an annual independent audit. Before 2023, 401(k) plan participants who were eligible to make salary deferrals were counted as participants — even if they did not contribute anything — for purposes of counting the number of participants. The DOL changed the rules starting in 2023, among other things, to include only those with account balances as participants. Keep in mind that the number of participants can be decreased by taking advantage of rules that allow distributions of small account balances (accounts valued at less than $7,000 starting in 2024) to former participants.
Increased Plan Administration Costs – The time spent internally and by plan service providers increases as the number of plan participants increases, particularly if recordkeeping for a new category of participants is necessary. The LTPT employee rules raise unique recordkeeping challenges necessitating new programing and new procedures to stay in compliance.
Costly Corrective Actions – The employer must take steps to correct any instance of when an employee that is eligible to make elective deferrals was not notified of being eligible. Increasing the number of eligible employees increases the possibility of someone being missed. But the immediate concern is based on feedback that many administration systems are not ready for the implementation of the LTPT rules as early as January 1, 2024 (for calendar year plans). Any delay in communicating the eligibility to LTPT employees that causes a delay of payroll deductions of elective deferrals beyond their eligibility date would be an operational failure that would need correction under the IRS’s Employee Plans Compliance Resolution System (EPCRS). While corrective contributions to make up the employee’s missed contribution are not always required, notices would need to be provided to any participant that had a missed deferral period to advise them that their future retirement savings might need adjustment due to the delay in making elective deferrals.
Decreased Forfeitures – LTPT employees earn vesting credit for each year after 2021 during which they work at least 500 hours but less than 1,000 hours. While the vested percentage has no impact on the years the employer does not make contributions on the employee’s behalf, vesting as an LTPT employee carries over to any years that the employee becomes eligible for employer contributions.
Operational Compliance Before Plan Amendment Deadline – For a 401(k) plan to be “qualified” (that is, eligible for favorable tax treatment), it must comply with the statutory requirements in both form and in operation. SECURE provides that the written plan document is not required to be amended until the end of the 2025 plan year. However, the plan must operate in compliance with the applicable changes in the law for all plan years, starting with the effective date of the change. Since the LTPT rules took effect for plan years beginning on or after January 1, 2024, the 401(k) plan would need to be operated with those rules starting in 2024, even though a formal, written plan amendment is not required until the end of the 2025 plan year. Therefore, any decisions regarding compliance with the LTPT employee provisions should be documented and the proper procedures and controls put in place.

While plan sponsors might rely on their 401(k) plan service providers to identify eligible LTPT employees, liability for noncompliance remains on the employer. The risk associated with not allowing LTPT employees to make elective deferrals to a 401(k) plan can be avoided if the plan lowers the 1,000-hour requirement to not more than 500 hours or determines eligibility on the elapsed time method instead of the counting hours method of determining eligibility to make salary deferrals under the plan.

SECURE provides numerous exceptions from coverage, nondiscrimination, and top heaviness tests for employees who participate in the plan solely on account of the LTPT employee provisions. Any employee that satisfies the more generous plan document provisions will not qualify for the confusing rules that otherwise apply to LTPT employees. Still, avoiding LTPT employee status altogether might be cost effective.

While much of your estate plan focuses on actions that take place after death, it’s equally important to have a plan for making critical financial or medical decisions if you’re unable to make them for yourself during your lifetime. This is why including a power of attorney in your estate plan is a must.

Defining a power of attorney

A power of attorney is defined as a legal document authorizing another person to act on your behalf. This person is referred to as the “attorney-in-fact” or “agent” — or sometimes by the same name as the document, “power of attorney.” Generally, there are separate powers of attorney for health care and property.

Be aware that a power of attorney is no longer valid if you become incapacitated. For many people, this is actually when the authorization is needed the most. Therefore, to thwart dire circumstances, you can adopt a “durable” power of attorney.

A durable power of attorney remains in effect if you become incapacitated and terminates only on your death. Thus, it’s generally preferable to a regular power of attorney. The document must include specific language required under state law to qualify as a durable power of attorney.

Naming your power of attorney

Despite the name, your power of attorney doesn’t necessarily have to involve an attorney, although that’s an option. Typically, in the case of a power of attorney for property, the designated agent is either a professional, such as an attorney, CPA or financial planner, or a family member or close friend. In any event, the person should be someone you trust implicitly and who is adept at financial matters. In the case of a health care power of attorney, a family member or close friend is the most common choice.

Regardless of whom you choose, it’s important to name a successor agent in case your top choice is unable to fulfill the duties or predeceases you.

Usually, the power of attorney will simply continue until death. However, you may revoke it — whether it’s durable or not — at any time and for any reason. If you’ve had a change of heart, notify the agent in writing about the revocation. In addition, notify other parties who may be affected.

Time is of the essence

To ensure that your health care and financial wishes are carried out, prepare and sign health care and financial powers of attorney as soon as possible. Don’t forget to let your family know how to gain access to the documents in case of emergency. Note that health care providers and financial institutions may be reluctant to honor a power of attorney that was executed years or decades earlier. Sign new documents periodically. Contact us with questions.

Since July 2023, the IRS has taken a series of actions in response to what it has termed a “flood of ineligible claims” for the Employee Retention Tax Credit (ERTC). Most recently, it launched a Voluntary Disclosure Program (VDP). The program presents a valuable, but temporary, opportunity for eligible employers.

Flood of invalid ERTC claims

The ERTC is a refundable tax credit intended for businesses that 1) continued paying employees while they were shut down due to the pandemic in 2020 and 2021, or 2) suffered significant declines in gross receipts from March 13, 2020, to December 31, 2021.

With the credits worth up to $26,000 per retained employee, fraudulent promoters and marketers quickly pounced, offering to help employers file claims in exchange for large upfront fees or percentages of the money received. But the requirements for the credit are stringent, and many employers were misled into filing claims that have proven to be invalid, leaving those claimants at risk of liability for credit repayment, penalties and interest, as well as other tax problems.

IRS’s response

In the face of the deluge of invalid claims, the IRS intensified audits and criminal investigations of both promoters and businesses filing suspect claims. As of December 2023, it had more than 300 criminal cases underway with claims worth nearly $3 billion, and thousands of ERTC claims had been referred for audit.

The IRS also has instituted a moratorium on the processing of new ERTC claims. And, in October 2023, the agency began offering a withdrawal option for eligible employers that filed a claim but haven’t yet received, cashed or deposited a refund. Withdrawn claims will be treated as if they were never filed, so taxpayers need not fear repayment, penalties or interest.

In late December 2023, the IRS announced another ERTC relief initiative, the VDP. The program is intended for employers that claimed and received credit money but weren’t entitled to it.

VDP nuts and bolts

Employers that participate in the VDP may benefit in several ways. For example, they’re required to repay only 80% of the credit received (if repayment in full isn’t possible, the IRS may authorize an installment plan). They also aren’t required to repay any interest received on an ERTC refund or amend their income tax returns to reduce wage expense.

These employers won’t be subject to penalties or underpayment interest if the 80% repayment is made before the signed closing agreement is returned to the IRS. The 20% reduction won’t be treated as taxable income, and the IRS won’t audit the ERTC on employment tax returns for the tax periods covered by the closing agreement.

An employer can apply for the VDP for each tax period in which:

Its ERTC claim was 1) processed and paid as a refund that has been cashed or deposited, or 2) paid in the form of a credit applied to that or another tax period,
It believes it wasn’t entitled to the ERTC,
It isn’t under IRS audit for employment taxes,
It isn’t under IRS criminal investigation, and
The IRS hasn’t reversed, or notified the employer of its intent to reverse, the ERTC to zero (for example, with a letter or notice disallowing the credit).

Notably, the IRS is sending up to 20,000 letters with proposed tax adjustments for the 2020 tax year to recover ineligible claims, in addition to 20,000 denial letters it sent earlier. The agency continues to work on the 2021 tax year, with more mailings to come. When an employer is identified through this work as receiving excessive or erroneous ERTCs, the IRS will pursue normal tax assessment and collection procedures.

If a third-party payer filed an employment tax return that reported an employer’s ERTC-related wages and credits, the employer can participate in the VDP only through the third-party payer. It’ll be rejected if it applies with its own employer identification number.

Act now

Bear in mind that not every ERTC claim was invalid. If you’re at all uncertain about the validity of your claim, regardless of whether you’ve received payment, we can help you navigate this increasingly complex area of your tax liability. The VDP is open only until March 22, 2024, though, so don’t delay.

Join us in welcoming Carrie Lapka, CPA, CPPM, back to the firm as a senior manager. Let’s learn about Carrie and her perspective on her career, the best advice she’s ever received, and giving back.

What are your roles in the firm?

As a member of the Tax & Consulting Service Line, I specialize in consulting and practice management for healthcare organizations. I am a Certified Physician Practice Manager, and I have experience in revenue cycle management, human resources, healthcare billing and compliance, and general business processes. I also have a background in business consulting, preparation and analysis of financial statements, and tax planning and preparation.

Tell us about your career path.

I began my career at Yeo & Yeo in 2004 and built a lot of great relationships along the way. In my last few years at the firm, I closely managed a client’s medical practice and obtained the Certified Physician Practice Manager credential. Shortly after that, I went to work directly for that client as the Practice Manager while remaining a client of Yeo & Yeo over the years. I am returning to the firm with more than ten years of experience managing a medical practice and much more healthcare industry knowledge. I am now a senior manager in the Tax & Consulting Service Line, based in the Saginaw office. I look forward to serving as a valuable resource to our team.

What causes or organizations are you passionate about?

I serve as treasurer and board member of my local school district, Caseville Public Schools. I also chair our Finance and Sports Committees and was instrumental in passing a recent school bond proposal to fund some major security updates and improvements to our school’s campus.

What was the best advice you ever received?

“Surround yourself with a trusted circle of advisors.” As a business manager, you should always have a good relationship and close contact with your insurance agent, attorney, CPA, banker, and mentor. I’ve relied on each of these over the years, and routinely pass that advice on to anyone currently in business or thinking about going into business.

What do you enjoy doing outside of the office?

Playing volleyball is a passion of mine. I always enjoyed playing throughout my grade school years and was reintroduced to it a couple of years ago when my daughter showed interest in it. We have a co-ed group that I play with each week. I am also a volleyball coach at Caseville Elementary.

Share a story about a time when you positively impacted someone’s life, personally or professionally.

I restarted the volleyball program for our elementary girls last year, which rekindled my love for the sport. The league had been dormant for a few years following COVID, and the girls really wanted to play. We now offer the program to our third-, fourth-, and fifth-grade girls. It’s definitely a time investment, but I’m always reminded of why I do it when I watch their excitement build as they hit the ball over the net for the first time. I know they’re starting a love for a sport they’ll most likely continue to enjoy throughout their lives.

An Irrevocable Life Insurance Trust (ILIT) is a tool that can be utilized to transfer wealth and avoid including life insurance assets in your taxable estate upon death. By setting up an ILIT, you can also protect assets in the irrevocable trust from creditors for you and your beneficiaries. The primary limitation of an ILIT is that once the trust is established, it is irrevocable and cannot be changed. In this article, we explore the advantages and considerations associated with ILITs, emphasizing their role in minimizing estate taxes, sidestepping gift taxes, and securing assets for the benefit of future generations.

Benefits of an ILIT

Establishing an ILIT presents many advantages, making it an attractive option for individuals seeking to transfer wealth seamlessly to the next generation. Key benefits include:

Estate tax minimization: ILITs serve as a strategic tool to minimize potential estate taxes, ensuring a more efficient wealth transfer process.
Gift tax exclusion: Through ILITs, one can navigate gift tax implications by utilizing the annual gift tax exclusion, provided beneficiaries are duly notified of their withdrawal rights.
Creditor protection: Assets held within an ILIT are shielded from creditors, offering a robust layer of protection for both the grantor and beneficiaries.
Strategic asset management: ILITs allow for meticulous management of distributions, empowering trustees to control how assets are distributed among beneficiaries based on the trust document.
Legacy planning: With the irrevocable nature of ILITs, they become a reliable tool for legacy planning, ensuring a structured and controlled distribution of assets over time.

Considerations for ILIT setup

While ILITs offer substantial benefits, it’s crucial to note that once established, these trusts become irrevocable and cannot be altered, underscoring the importance of careful planning and consideration.

Gifts to ILIT and the Crummey letter: The process involves the insured making annual gifts to the ILIT for premium payments on the life insurance. To qualify for the annual gift tax exclusion, beneficiaries must be notified of their withdrawal rights through a Crummey letter. A Crummey letter is a written document explaining the withdrawal right of the gift to the beneficiary. The letter, which must be sent to each beneficiary, must indicate the amount of the gift and the length of time they have to exercise their withdrawal right. It must also let the beneficiaries know that if they do not exercise their withdrawal right, the assets will remain in the trust. If the beneficiary does not exercise their withdrawal right, the gift made to the ILIT will be available for the life insurance premiums to be paid on the life of the insured. The trustee is responsible for drafting and distributing the Crummey letters to the beneficiaries. Without this acknowledgement of the gift, the gift is not determined to be “completed” and would not be eligible for the annual gift exclusion amount.
Gift tax considerations: Grantors must be mindful of total gifts to beneficiaries throughout the year. If other gifts are being given to the beneficiaries, the giver must consider the total gifts given when considering if there is a taxable gift situation. If more than the annual exclusion is gifted to any one beneficiary, it will trigger a gift tax filing for that tax year.
Strategic non-exercise of withdrawal right: Beneficiaries may find it beneficial not to exercise their withdrawal right, allowing assets to remain in the ILIT for life insurance premium payments. This strategic move ensures a consistent funding source for the policy.
Controlled distributions and legacy planning: Upon the insured’s death, ILITs provide flexibility in distributing life insurance proceeds. Trustees can manage distributions based on the trust document, preventing young beneficiaries from receiving a lump sum and instead allowing for structured payments over time.

In conclusion, using an ILIT is just one way to exclude the proceeds upon death from a taxable estate. ILITs are a strategic and effective tool for wealth transfer, providing benefits such as estate tax minimization, gift tax exclusion, asset protection, and controlled legacy planning. Careful consideration, proper documentation, and strategic planning are essential elements in harnessing the full potential of ILITs for long-term financial success.

Understanding and adhering to Human Resources (HR) compliance is paramount for employers. Beyond the complexities of daily operations, employers must be well-versed in the intricacies of employment laws, regulations, and ethical standards. In this article, we will explore 10 key aspects that employers should know about HR compliance to foster a healthy, legally sound, and thriving work environment.

Legal Foundation: Employers must establish a robust legal foundation by familiarizing themselves with local, state, and federal employment laws. From wage and hour regulations to workplace safety standards, a comprehensive understanding of the legal framework is essential for avoiding legal pitfalls.
Documented Policies and Procedures: Clear and comprehensive documentation of company policies and procedures is a cornerstone of HR compliance. Employers should ensure that their organizations have well-documented guidelines covering areas such as anti-discrimination policies, code of conduct, and employee benefits. This documentation not only serves as a reference for employees but also protects the organization in legal matters.
Employee Classification: Properly classifying employees as exempt or non-exempt is critical for compliance with wage and hour laws. Employers should understand the criteria that determine employee classifications, including factors such as job duties, salary, and overtime eligibility.
Workplace Diversity and Inclusion: In the era of inclusivity, employers should be cognizant of the importance of workplace diversity and inclusion. Compliance extends to fostering an environment free from discrimination and harassment. Employers should have policies in place to promote diversity and inclusion and address any issues promptly.
Health and Safety Compliance: Providing a safe and healthy work environment is not only an ethical responsibility but also a legal requirement. Employers must adhere to Occupational Safety and Health Administration (OSHA) standards, conduct regular safety training, and implement protocols to minimize workplace hazards.
Employee Rights: Employers should be well-versed in employee rights, including but not limited to the right to privacy, accommodation for disabilities, and protection against retaliation. Knowledge of these rights is essential for preventing legal disputes and maintaining a positive workplace culture.
Data Privacy and Security: With the increasing reliance on technology, employers should prioritize data privacy and security. Compliance with data protection laws, such as the General Data Protection Regulation (GDPR) and the Health Insurance Portability and Accountability Act (HIPAA), is crucial for safeguarding employee information.
Training and Development: Providing ongoing training for employees and managers is essential for staying compliant. This includes regular updates on changes in policies, laws, and industry standards. Training ensures that employees are aware of their rights and responsibilities, reducing the risk of inadvertent non-compliance.
Recordkeeping: Maintaining accurate and up-to-date records is not only good business practice but also a legal requirement. Employers should keep records related to employee hours, payroll, tax filings, and other relevant documentation to demonstrate compliance in the event of an audit.
Seeking Professional Guidance: When in doubt, employers should not hesitate to seek professional guidance. Consulting with HR professionals, legal professionals, or engaging with an HR service provider can provide valuable insights and ensure that the organization remains on solid legal ground.

To help you stay on top of compliance requirements and meet regulatory deadlines, view our 2024 HR Compliance Calendar. Download a copy to save for your ongoing reference in 2024.

View Our 2024 HR Compliance Calendar

Does your business file 10 or more information returns with the IRS? If so, you must now file them electronically. This is a significant rule change that went into effect on January 1, 2024, for 2023 tax year information returns.

The threshold for electronically filing most information returns has dropped from 250 to 10. Before the new rule, only businesses filing 250 or more information returns were required to do so electronically. Notably, the 250-return threshold was applied separately to each type of information return. Now, businesses must e-file returns if the combined total of all the information return types filed is 10 or more.

Final regulations on the new rule were issued February 21, 2023, by the U.S. Department of the Treasury and the IRS.

Affected information returns

The IRS reports that it receives nearly 4 billion information returns each year. And by 2028, the agency predicts it will receive over 5 billion information returns per year.

The final regs state that the new e-filing requirements will be imposed on those taxpayers “required to file certain returns, including partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns.”

Here are just some of the forms involved:

Forms 1099 issued to report independent contractor income, interest and dividend income, retirement plan distributions, prizes and other payments,
Form W-2 issued to report employee wages,
Form 1098 issued to report mortgage interest paid for the year, and
Form 8300 issued to report cash payments over $10,000 received in a trade or business.

Note: January 31 is the deadline for submitting to the government W-2 wage statements, 1099-NEC forms for independent contractors and other forms. You can find an IRS guide to information returns and when they’re due here.

Penalties and exceptions

The IRS may impose penalties on companies that are required to e-file information returns but instead file them on paper. Filers who would suffer an undue hardship if they had to file electronically can request a waiver from the e-filing requirement by filing Form 8508 with the IRS. Contact us for more guidance on your information return filing obligations.

Operating your small business as a Qualified Small Business Corporation (QSBC) could be a tax-wise idea.

Tax-free treatment for eligible stock gains

QSBCs are the same as garden-variety C corporations for tax and legal purposes — except QSBC shareholders are potentially eligible to exclude from federal income tax 100% of their stock sale gains. That translates into a 0% federal income tax rate on QSBC stock sale profits! However, you must meet several requirements set forth in Section 1202 of the Internal Revenue Code, and not all shares meet the tax-law description of QSBC stock. Finally, there are limitations on the amount of QSBC stock sale gain that you can exclude in any one tax year (but they’re unlikely to apply).

Stock acquisition date is key

The 100% federal income tax gain exclusion is only available for sales of QSBC shares that were acquired on or after September 28, 2010.

If you currently operate as a sole proprietorship, single-member LLC treated as a sole proprietorship, partnership or multi-member LLC treated as a partnership, you’ll have to incorporate the business and issue yourself shares to attain QSBC status.

Important: The act of incorporating a business shouldn’t be taken lightly. We can help you evaluate the pros and cons of taking this step.

Here are some more rules and requirements:

Eligibility. The gain exclusion break isn’t available for QSBC shares owned by another C corporation. However, QSBC shares held by individuals, LLCs, partnerships, and S corporations are potentially eligible.
Holding period. To be eligible for the 100% stock sale gain exclusion deal, you must hold your QSBC shares for over five years. For shares that haven’t yet been issued, the 100% gain exclusion break will only be available for sales that occur sometime in 2029 or beyond.
Acquisition of shares. You must acquire the shares after August 10, 1993, and they generally must be acquired upon original issuance by the corporation or by gift or inheritance.
Businesses that aren’t eligible. The corporation must actively conduct a qualified business. Qualified businesses don’t include those rendering services in the fields of health; law; engineering; architecture; accounting; actuarial science; performing arts; consulting; athletics; financial services; brokerage services; businesses where the principal asset is the reputation or skill of employees; banking; insurance; leasing; financing; investing; farming; production or extraction of oil, natural gas, or other minerals for which percentage depletion deductions are allowed; or the operation of a hotel, motel, restaurant, or similar business.
Asset limits. The corporation’s gross assets can’t exceed $50 million immediately after your shares are issued. If after the stock is issued, the corporation grows and exceeds the $50 million threshold, it won’t lose its QSBC status for that reason.

2017 law sweetened the deal

The Tax Cuts and Jobs Act made a flat 21% corporate federal income tax rate permanent, assuming no backtracking by Congress. So, if you own shares in a profitable QSBC and you eventually sell them when you’re eligible for the 100% gain exclusion break, the 21% corporate rate could be all the income tax that’s ever owed to Uncle Sam.

Tax incentives drive the decision

Before concluding that you can operate your business as a QSBC, consult with us. We’ve summarized the most important eligibility rules here, but there are more. The 100% federal income tax stock sale gain exclusion break and the flat 21% corporate federal income tax rate are two strong incentives for eligible small businesses to operate as QSBCs.

The evolution of business management solutions for manufacturing companies has spawned many product offerings in the market. As solutions become more technologically advanced and robust, it can be challenging to sift through features required to support growth and those that are cosmetic.

To get the most out of any solution, it’s important to understand the types of systems that are available and how they differ.

What is an MRP system?

Manufacturing resource planning (MRP) systems are often standalone applications that operate in a modular organizational structure. Each module keeps track of and regulates specific characteristics and functions for the company, like product design, quality control, shop floor control, and general accounting. MRP II introduced the closed-loop model, which uses a centrally held data file to record, monitor, and report on various company activities.

What is an ERP system?

Enterprise resource planning (ERP) solutions combine the modules monitored in an MRP system and integrate them to support all business functions, not just those relative to manufacturing.

Manufacturing businesses look at ERP systems to support quality product delivery at a low cost. For example, it should support internal collaboration, so product requirements are clearly defined and communicated, with production coordinated with the delivery and product teams.

Benefits of ERP over an MRP system (or older)

According to Sage, ERP adopters are 44% more likely to have visibility into the status of all processes and 75% more likely to have automated notifications for business events. With enhanced visibility, agility, and efficiency, manufacturers implementing an ERP system can see increases in productivity, profitability and on-time delivery.

A good foundation is the best preparation

The state of manufacturing is increasingly moving towards business models that leverage new processes to increase visibility, agility, collaboration, and efficiency.

By working closely with an ERP vendor, manufacturers can identify key opportunities for their enterprise and adopt a solution that can be easily scaled as needed.

Are you interested in ERP? Contact Yeo & Yeo Technology to learn more about our ERP solutions.

Information used in this article was provided by our partners at Sage.

As audit season begins for calendar-year entities, it’s important to review issues that may arise during fieldwork. One common issue is materiality. This concept is used to determine what’s important enough to be included in — and what can be omitted from — a financial statement. Here’s how materiality is determined and used during an external financial statement audit.

What is materiality?

Under U.S. auditing standards and Generally Accepted Accounting Principles (GAAP), “The omission or misstatement of an item in a financial report is material if, in light of surrounding circumstances, the magnitude of the item is such that it is probable [emphasis added] that the judgment of a reasonable person relying upon the report would have been changed or influenced by the inclusion or correction of the item.”

This aligns with the definition of materiality used by the U.S. judicial system. However, it differs somewhat from the definition set by the International Accounting Standards Board. Under International Financial Reporting Standards (IFRS), misstatements and omissions are considered material if they, individually or in the aggregate, could “reasonably be expected to influence the economic decisions of users made on the basis of the financial statements.”

How do auditors determine the materiality threshold?

Auditors rely on their professional judgment to determine what’s material for each company, based on such factors as:

Size,
Industry,
Internal controls, and
Financial performance.

During fieldwork, auditors may ask about line items on the financial statements that have changed materially from the prior year. A materiality rule of thumb for small businesses might be to inquire about items that change by more than, say, 10% or $10,000. For example, if shipping or direct labor costs increased by 30% in 2023, it may raise a red flag, especially if it didn’t correlate with an increase in revenue. Businesses should be ready to explain why costs went up and provide supporting documents (such as invoices or payroll records) for auditors to review.

Establishing what’s material is less clear when CPAs attest to subject matters that can’t be measured — such as sustainability programs, employee education initiatives or fair labor practices. As nonfinancial matters are taking on increasing importance, it’s critical to understand what information will most significantly impact stakeholders’ decision-making process. In this context, the term “stakeholders” could refer to more than just investors. It also could refer to customers, employees and suppliers.

For more information

Materiality is one of the gray areas in financial reporting. Contact us to discuss the appropriate materiality threshold for your upcoming audit.

Among the biggest mistakes employers can make is assuming their leaders are finished products. Whether a supervisor, middle manager or executive, leaders need continuous development to keep up with the ever-evolving norms, challenges and opportunities to fulfill their roles.

The good news is leadership development pays off, at least according to one recent survey. Last year, management consultants BetterManager surveyed 752 leadership professionals in the United States, Canada and the United Kingdom whose job duties include developing internal leadership. Among the most notable statistics in the resulting report, The ROI of Leadership Development, is that responding organizations saw a $7 average return on investment for every $1 spent on efforts to develop their leaders.

Of course, there’s no guarantee you’ll get that positive of a return on investment. It all depends on what your leadership development program looks like. Generally, you have two broad paths to choose from.

Develop internally

Some organizations have the wherewithal and resources to put together their own leadership development programs. These tend to be larger employers that can dedicate the staff to developing the program’s content, perhaps with the help of a consultant, and maintaining it thereafter.

There are two primary advantages to doing it yourself. First, you may be able to control all or most of the costs of designing and running the program rather than paying a hefty fee to an external provider. Second, you can design and maintain the program’s content using all the detailed knowledge of your organization that only you possess — including details of upcoming strategic plans that may drive the need to upgrade certain leadership skills.

On the downside, it can be an incredible draw on internal resources to lay out a blueprint for a leadership development program, implement that plan and then run the program. And make no mistake — leadership development programs demand a long-term commitment to see a return on investment.

Work with an external provider

The alternative is to engage an outside consulting firm to develop and even run a leadership development program for you. Doing so may especially suit smaller organizations, or perhaps those just getting started with the concept. This has the advantage of being a one-time or occasional cost, rather than an ongoing draw on your staff’s time and energy. You should also get the intensive expertise of a specialist in this area.

And the disadvantages? For starters, you’ll need to search for, vet and hammer out a deal with the consultant. That alone will take some time. In addition, the cost can be a substantial hit to your cash flow, and you’ll still need to dedicate time and energy to working with the provider to develop the program and monitor the results.

Your leaders may not feel as engaged either, having to deal with external people and materials. And therein lies another key to successful leadership development programs: You’ve got to get buy-in from the executive level on down.

Be mindful and proactive

As the complexity of being an employer in today’s world continues to grow, strong leadership throughout your organization is imperative. There can be real value in mindfully and proactively creating a leadership development program. Contact us for help identifying and evaluating all the costs of whatever approach you’re considering.

Yeo & Yeo is pleased to welcome back Carrie Lapka, CPA, CPPM, as a senior manager.

“We are excited to welcome Carrie back to the firm,” says David Jewell, Principal and Tax & Consulting Service Line Leader. “Carrie’s diverse background in accounting and physician practice management makes her a great resource for our Healthcare Services Group and our healthcare clients across all Yeo & Yeo companies.”

Lapka brings more than 20 years of experience in accounting and physician practice management. She started her career with Yeo & Yeo in 2004. After nearly ten years in public accounting with a specialization in the healthcare industry, Lapka went on to work in private practice as a Practice Manager for ten years. She is a Certified Physician Practice Manager, possessing extensive knowledge in revenue cycle management, human resources, healthcare billing and compliance, and general business processes. The firm’s healthcare clients will greatly benefit from her expertise in supporting their business needs, including operational efficiencies, staff training, and technology. Beyond her experience in practice management, Lapka has an extensive background in business consulting, preparation and analysis of financial statements, and tax planning and preparation. She holds a Bachelor of Professional Accountancy from Saginaw Valley State University.

In the community, she is deeply involved with Caseville Public Schools, serving as a board member and treasurer, and as chair of both the Finance and Sports Committees. She is also an elementary volleyball coach. Lapka is based in Yeo & Yeo’s Saginaw office.

“In my nearly ten years with Yeo & Yeo and then continuing as a client of the firm, I have built many great relationships. I am excited to be back and bring my specialized knowledge in the healthcare industry to the team and clients,” Lapka said.

In late December, the IRS issued new guidance under Announcement 2024-3 for employers that claimed and received the Employee Retention Credit (ERC) but were ineligible and applied in error, likely prompted by a third-party promoter. The program is called the Voluntary Disclosure Program and allows employers to pay back only 80% of the total ERC, interest free (if paid by the agreement date).

Additional details are as follows:

The deadline for applying through this program is March 22, 2024.
Participants are eligible if they have already received the ERC refund and are not under criminal investigation or employment tax examination, not considered to be noncompliant, and have not previously received notice that they must repay the ERC.
As mentioned above, only 80% of the credit received must be repaid and no interest payment is required. Additionally, participants are not required to reduce wage expense on tax returns. If they have previously amended returns to reduce wage expense, they can again amend returns to revert the changes and not reduce wage expense by any amount of the ERC.
Employers unable to pay the full 80% can request an installment agreement plan by including Form 433-B in the application package. The IRS will review and approve or deny. Interest may apply in this case.
To apply for the Voluntary Disclosure Program, the procedures below must be followed:
- File Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program via the Document Upload Tool at irs.gov/DUT.
- Include the taxpayer name, taxpayer identification number, current address, and daytime telephone number.
- Identify the tax period(s) for which the ERC was claimed, the form number on which it was claimed (941 or 7200), the full amount of the ERC claimed, and the amounts that were refundable and non-refundable.
- Include a signed Form SS-10, Consent to Extend the Time to Assess Employment Taxes if any periods end in 2020.
- Include the name, address, phone number, and services provided of any return preparer or advisors that assisted with the initial ERC claim.
- Use EFTPS to pay the amounts calculated from Form 15434. Payments should be separated by each tax period. “Advanced Payment” should be selected as the payment category.
After the above information is submitted, the IRS will prepare and mail a closing agreement. The payment of 80% of the ERC should be made by the date of this agreement. The closing agreement must be signed and returned to the IRS within 10 days of the date of mailing by the IRS.
If a participant uses a third-party organization to process their payroll and apply for the ERC, such as a professional employer organization (PEO), the third-party/PEO is required to file the Form 15434 and include a copy of the Schedule R of the 941 on which the ERC was claimed for the participant.

Participants in the Voluntary Disclosure Program will be required to sign a closing agreement drafted by the IRS. Payment of 80% of the claimed ERC must be remitted by the date of execution of the agreement. There could be opportunities for installment payments under certain circumstances.

Announcement 2024-3 highlights two additional items that participants need to be aware of.

If the application for participation in the program is denied, there is no right to administrative appeal or judicial review, and;
By entering into the closing agreement, the IRS will not assert civil penalties related to the underpayment of employment tax if full payment of 80% of the claimed ERC is made prior to the execution of the agreement. However, the agreement does not preclude the IRS from pursuing associated criminal conduct or recommending prosecution for violation of any criminal statute. The agreement does not provide any immunity from prosecution.

Because of the limitations associated with entering into the agreement, it is recommended that taxpayers contact legal counsel before entering into a closing agreement under the Voluntary Disclosure Program.

As a reminder, there is also a separate withdrawal process for employers who have erroneously claimed the ERC but have not yet received the funds. As of early December, businesses have withdrawn more than $100 million in pending claims from the IRS.

Helpful links:

Please contact your Yeo & Yeo advisor if you have questions or need assistance.