The Clock is Ticking for ERC Voluntary Disclosure Program

In December 2023, the Internal Revenue Service (IRS) released details regarding the Voluntary Disclosure Program (VDP or Disclosure) to help businesses pay back Employee Retention Credit (ERC) claims filed in error. Most errors are a result of improper eligibility determinations that now require full reversal of the ERC claim. There are many benefits of ERC-VDP that a business should not overlook in the event that they no longer believe they qualify for ERC. However, to avoid potential examinations and costly penalties and interest in the future, you must take action before March 22, 2024.

What is the financial benefit of the ERC Disclosure?

• You voluntarily pay back only 80 percent of ERC refund with no interest or penalties assessed.
• The interest income you received with the ERC refund is yours to keep and does not have to be repaid to the IRS.
• The 20 percent payment reduction is not taxable income.

What is the administrative benefit of the ERC Disclosure?

• You are not required to re-amend your employment tax return to reflect the removal of your ERC claim.
• The IRS will not audit your employment tax returns for the years included in the VDP.

What are the program guidelines?

The guidelines for the VDP include the following:

1) You must respond timely to any IRS requests for information pertaining to your ERC claim.

2) You must provide information requested by the IRS about those who advised or assisted with the preparation of your ERC claim.

3) You must provide a signed closing agreement to the IRS.

How can I apply for the ERC Voluntary Disclosure Program?

To apply for the ERC-VDP, you must submit Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program. For 2020 VDP requests, the application must be accompanied by Form SS-10, Consent to Extend the Time to Assess Employment Taxes. If you are unable to make full repayment of the 80 percent of your ERC refund and need a payment plan, you should also include Form 433-B and supporting documentation for installment agreement consideration.

Since each calendar quarter stands alone, a business can apply for ERC-VDP for one quarter and maintain their ERC claim for another quarter.

ERC-VDP is not available for a business seeking to adjust the amount of their ERC due to a possible miscalculation – the program is only suited for those wanting to forgo their entire ERC claim. If a business needs to adjust the amount of their ERC refund, they should consider filing another amended employment tax return.

For claims not yet processed and paid, the IRS Withdrawal Program has been extended and currently still accepting requests. It is important to note that this is a separate program from the ERC-VDP, and careful consideration is needed for both.

For questions or more information about ERC Disclosure, contact your Windham Brannon advisor before the March 22 deadline, or contact Tomika Bullet.