If a taxpayer claimed an Employee Retention Credit (ERC) but was ineligible to receive the credit, then the IRS has created the “Employee Retention Credit Voluntary Disclosure Program” or ERC-VDP to help resolve those erroneous credit claims. This program, announced this week via IRS Announcement 2024-3, allows taxpayers who inappropriately received ERC funds to pay back the IRS without penalty or interest. This ERC-VPD announcement goes hand in hand with the previously announced ERC claim processing moratorium and ERC withdraw process.
The ERC-VDP is a voluntary settlement process by which eligible employers are permitted to pay back 80% of the claim and retain the other 20%. Importantly, to be eligible to participate in the ERC-VDP, one must meet all of the following:
- Have received ERC payment that it was not entitled to
- Not be under criminal investigation
- Not be in an IRS audit for any tax period(s) for which they are applying for the ERC-VDP
- Have not received an IRS demand for ERC repayment, nor has the IRS received information that the taxpayer is not in compliance from an enforcement action
To apply for this ERC-VDP, Form 15434: Application for Employee Retention Credit Voluntary Disclosure Program must be submitted by March 22, 2024. It can be submitted via the IRS Document Upload Tool at irs.gov/DUT. The form includes instructions on calculating the appropriate repayment amount, and payments are also made via the IRS online system. If an application is approved and full repayment of the 80% claimed ERC is not possible, installation agreements may be permitted. Importantly, if a third-party was used to file the ERC claim, then the application should come from the third-party and include their EIN on the application.
Note that denial of an ERC-VDP application is not subject to judicial review or administrative appeal, and that an approved ERC-VDP application does not preclude the IRS from pursuing criminal charges for a willfully fraudulent claim.
For more information on this new program, refer to the IRS news release, the FAQ, and the homepage for the program.
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