The Employee Retention Credit Voluntary Disclosure Program is an IRS initiative for businesses that mistakenly claimed the Employee Retention Credit. It helps avoid severe penalties and potential criminal charges due to unintentional misfiling or erroneous claims.
The program requires you to:
• Voluntarily pay back the ERC, minus 20%,
• Cooperate with any requests from the IRS for more information, and
• Sign a closing agreement.
Advantages of the ERC Voluntary Disclosure Program
There are several benefits to using the ERC-VDP if you received the ERC but weren’t entitled to it and now want to pay the money back. If you apply to the ERC-VDP:
• You need to repay only 80% of the ERC you received as a credit on your return or as a refund.
• You don’t need to repay any interest you received on your ERC refund.
• You don’t have to amend income tax returns to reduce wage expense.
• The 20% reduction is not taxable as income.
• The IRS will not charge penalties or interest on the claimed ERC amount if you pay it in full (claimed ERC minus 20%) by the time you return your signed closing agreement to IRS.
• The IRS won’t examine ERC on your employment tax return for tax period(s) resolved within the terms of ERC-VDP.
Who can apply to the ERC Voluntary Disclosure Program?
Businesses, tax-exempt organizations, and government entities are eligible to apply for the ERC-VDP for each tax period that meets all of the below-listed requirements.
• Your ERC claimed on an employment tax return has been processed and paid as a refund, which you have cashed or deposited, or paid in the form of a credit applied to the tax period or another tax period.
• You now think that you were entitled to $0 ERC.
• You’re not under employment tax examination (audit) by the IRS.
• You’re not under criminal investigation by the IRS.
• The IRS has not reversed or notified you of intent to reverse your ERC to $0. For example, you received a letter or notice from the IRS disallowing your ERC.
If you used a third-party payer to file your employment tax returns or claim your ERC, you can’t apply to the ERC-VDP yourself. You must contact the third-party payer to apply.
Please note that if you willfully claimed an ERC that is fraudulent, or if you assisted or conspired in such conduct, applying to the ERC-VDP will not exempt you from potential criminal investigation and prosecution.
If you’re not eligible to participate in ERC-VDP because your ERC hasn’t been paid or if you have not yet deposited the ERC check, you may be able to use the ERC claim withdrawal process instead.
For more information on the withdrawal process go to: https://www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim
For more information on the ERC-VDP go to: https://www.irs.gov/coronavirus/employee-retention-credit-voluntary-disclosure-program
Critical Deadline: March 22, 2024
Apply by this date to repay only 80% of the previously received ERC, significantly easing your business’s financial burden. Miss this chance, and you may face larger repayments and penalties.
If you have any questions or concerns, please do not hesitate to contact your HSC service leader or call our office at 800.880.7800.
