Taxpayers…if you filed a claim for the ERC and believe it is false, you’re in luck! The IRS has announced a limited time voluntary disclosure program, allowing businesses to correct improper claims at a 15% discount. How can you benefit? Let’s dive in.

Background: Check out our ERC Insights page for more information on the ERC and how to qualify for the credit.

What’s new?

From now through November 22, 2024, businesses will be able to correct improper ERC payments through the ERC Voluntary Disclosure Program (VDP). Concurrently, the IRS has announced plans to send up to 30,000 letters to businesses to reverse their ERC claims previously filed. These IRS efforts are expected to impact ERC claims with an aggregate value of over $1billion. The IRS is publicizing these efforts to encourage participation in the VDP program.

Was the first Voluntary Disclosure Program (VDP) successful?

As we reported in a previous blog, the first ERC VDP ran from December 2023 through March 2024. Through the first VDP, the IRS was able to capture 2,600 applications, disclosing $1.09 billion in credits.

What are the benefits of the VDP?

Through the program, businesses will benefit from a 15% discount on repayments and will avoid penalties, interest and future audits.

Additionally, the VDP allows businesses to self-correct errors without stringent IRS compliance actions.

Who can apply for the ERC VDP?

The ERC VDP allows employers to repay 85% of a falsely claimed ERC without penalty or interest if you meet the following criteria:

• You have not already applied to the first ERC VDP for the same tax periods.
• You are not under an IRS employment tax examination for the tax period you’re applying for
• You are not under criminal investigation.
• You have not received a Letter 6577-C, ERC Recapture, or an IRS notice and demand for repayment of part or all of the ERC claim.
• You have not already filed an amended return to remove your ERC claim.
• You have not received information from a third party or directly from an enforcement action that you are not in compliance.

Where can you access the application?

Eligible employers must file Form 15434, Application for ERC VDP and submit it to the IRS through the document upload tool, which can be accessed here: https://www.irs.gov/help/irs-document-upload-tool

What if you outsource your payroll?

If you outsource your payroll to a third party, the third party must file form 15434 on your behalf.

What can you expect after applying?

After applying and submitting Form 15434, an IRS representative will reach out to review the application. If you are approved, you will receive a closing agreement from the IRS, after which you must repay 85% of the false ERC claim using the Electronic Federal Tax Payment System (EFTPS) either online or by phone.

Do you have to pay the entire 85% immediately?

The IRS offers the option of an installment agreement if you cannot pay in full. However, penalties and interest will apply according to standard installment agreement terms. No penalties and interest are assessed if you pay the 85% in full.