IRS Announces Voluntary Disclosure Program for Ineligible Employers Who Claimed Employee Retention Credit

Date January 19, 2024

In its continued effort to combat erroneous Employee Retention Credit (ERC) claims, the IRS announced a new Voluntary Disclosure Program (VDP) for employers who claimed and received the ERC, but may not be eligible. The program is open through March 22, 2024, so taxpayers that received ERC should analyze their eligibility to determine if they need to apply.

Highlights of the ERC Voluntary Disclosure Program include:

  • Ineligible recipients will be required to repay 80 percent of the ERC received.
  • The remaining 20 percent is not taxable.
  • Any interest received on ERC funds does not need to be repaid.
  • Ineligible recipients are not required to amend prior tax returns to reduce wages.
  • No penalties will be applied if 80 percent of the funds is repaid in full by end of the closing agreement.
  • No ERC examinations are required for ERC claims resolved under the VDP.
  • Applicants for the VDP must apply electronically by end of day, March 22, 2024.
  • If you claimed an ERC on an employment tax return that has been processed and paid as a refund that you have cashed or deposited, or paid in the form of a credit applied to the tax period or another tax period, you may be eligible to apply for the program if you meet all the following requirements:

  • You now think that you are not entitled to any ERC.
  • You are not under employment tax examination by the IRS.
  • You are not under criminal investigation by the IRS.
  • You have not received a letter from the IRS disallowing your ERC.
  • The IRS application process includes a form that must be electronically filed. Applicants will receive a letter from the IRS confirming whether the application was accepted or rejected. If accepted, the IRS will mail a closing agreement documenting the terms of the program. The agreement as returned to the IRS must be signed by an authorized person and include the repayment of the 80 percent ERC claim or installment agreement. You must make the repayment using the IRS Electronic Federal Tax Payment System and make a separate payment for each period claimed.

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