Overview
On December 21, 2023, the Internal Revenue Service launched a Voluntary Disclosure Program that allows employers who received questionable Employee Retention Credits (ERCs) to repay them at a discounted rate. Employers must apply by March 22, 2024.
Employers who are accepted into the program will only be required to repay 80% of the credit they received. The IRS will not charge program participants interest or penalties on any credits they repay.
Employers who are unable to repay the required 80% of the credit may be considered for an installment agreement on a case-by-case basis, following submission of a Form 433-B, Collection Information Statement for Businesses, available on IRS.gov. However, the employer will be required to pay penalties and interest in connection with entering into an installment agreement.
To qualify for this program, employers are required to provide the IRS with names, addresses, and telephone numbers of any advisors or tax preparers who helped them with their ERC claim and details about the services provided.
Any employer who received the ERC but isn’t entitled to it can apply to the Voluntary Disclosure Program if:
(1) The employer is not under criminal investigation and has not been notified that they are under criminal investigation;
(2) The employer is not under an IRS employment tax examination for the tax period for which they’re applying to the Voluntary Disclosure Program;
(3) The employer has not received an IRS notice and demand for repayment of part or all of the ERC; and
(4) The IRS has not received information from a third party that the taxpayer is not in compliance or has not acquired information directly related to the noncompliance from an enforcement action.
Employers can apply by filing a Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, available on the IRS website, and submitting it using the IRS Document Upload Tool. Employers who outsource their payroll obligations to a third party must apply through the third party.
The Voluntary Disclosure Program is the latest step in the IRS’s efforts to address erroneous ERC claims. As part of its ongoing efforts, the IRS also announced that it has begun sending up to 20,000 letters with proposed tax adjustments for erroneously claimed ERCs. This batch of letters, in addition to the other 20,000 denial notices announced earlier in December, only target claims from the 2020 tax year. Further mailings for the 2021 tax year are currently in the pipeline. Employers found to have improperly claimed the ERC will be subject to standard tax assessment and collection processes by the IRS.
