IRS Reopens ERC Voluntary Disclosure Program

Yesterday, the IRS announced the reopening of the Employee Retention Credit (ERC) Voluntary Disclosure Program, allowing business with ineligible ERC claims to repay a discounted amount without penalties or interest.

ERC Voluntary Disclosure Program Overview

• Participating businesses will be eligible to repay 85% of the original ERC received without penalties or interest.
• Any interest received on the ERC refund is not required to be paid back.
• The program is available for 2021 ERCs; 2020 ERCs are no longer eligible.

Eligible Employers

Employers that received an ERC that they were not entitled to can apply if they meet the following requirements.

• The employer did not apply to the first ERC Voluntary Disclosure Program for the same tax periods.
• The employer is not under criminal investigation; is not currently under IRS exam for employment taxes for the Voluntary Disclosure Program application tax period; and has not received a Letter 6577-C or an IRS notice and demand for repayment of part or all of its ERC claim.
• The employer hasn’t already filed an amended return to eliminate its ERC.
• The IRS hasn’t received information from a third party or directly from an enforcement action that the employer is not in compliance.

Voluntary Disclosure Program Process

• Applicants can apply by submitting Form 15434 Application for Employee retention Credit Voluntary Disclosure Program, through the IRS document upload tool by Nov. 22, 2024.
• Following the submission of the application, the IRS will contact the employer with any questions.
• If the application is approved, the IRS will send the employer a closing agreement documenting the terms of the repayment. The employer will then be required to remit the payment and return the signed closing agreement.

What’s Next

This represents a rare second chance for employers that did not participate in the IRS’ first Voluntary Disclosure Program. With this announcement, the IRS is reiterating its call to employers to make sure their ERC claims are appropriate. It’s the latest move in a series of IRS enforcement actions related to the ERC..

Employers with questionable or aggressive ERC claims should consider the merit of their ERC reclaims and whether to apply for the Voluntary Disclosure Program. If an employer hasn’t evaluated the merit of its claim, now is the time to work with a trusted professional to do so.

For additional information on the ERC program, reach out to your KSM advisor or complete this form.