Details on Employee Retention Credit Voluntary Disclosure Program

The Employee Retention Credit (ERC) voluntary disclosure program was announced earlier this month along with 20,000 disallowed ERC claims marking the latest in the IRS’ effort against sketchy ERC claims. The deadline to enter the program will be March 22, 2024 and will allow businesses the opportunity to pay 80 percent of the invalid claim free of penalties and interest. Employers unable to repay that amount will be considered for an installment program, but installment programs will include penalties and interest.

Program qualifications

The program is a welcomed option for employers who were pulled into ERC scams by “ERC specialists” under false pretenses. The program is open to employers that meet the following requirements:

• Employers who have received the employee retention credit claim but were not entitled to it. Those employers only qualify if:
  • There are no pending criminal investigations regarding their claim or notifications of such an investigation;
  • They are not under examination regarding IRS employment tax;
  • They have not received an IRS notification and demand for full or partial repayment of their claim;

The IRS cannot have received information from a third party that the taxpayer is non-compliant or acquired information directly related to the non-compliance from an enforcement action, or the employer will be disqualified.

Upon being accepted into the program, employers will be required to provide names, addresses, and telephone numbers of any advisors or tax preparers who advised or assisted them with their claim and details about services provided.

Applying for the program

Application to the program can be done through IRS.gov. Employers must file Form 15434, "Application for Employee Retention Credit Voluntary Disclosure Program," and submit it using the agency's Document Upload Tool. Employers who outsource their payroll must apply through the payroll company using their EIN. In this situation, the third party must file the Form 15434.

Once Form 15434 has been submitted by the appropriate party, an IRS employee will contact them to go over the application. If approved, the IRS will mail the employer a closing agreement. The employer must then repay 80 percent of the ERC they received using the Electronic Federal Tax Payment System.

The IRS has stated that the 80 percent repayment figure will be much more favorable than future IRS action.

Concerted effort from the IRS to ‘clean up’ ERC claims

The IRS has been focused on the employee retention credit for most of 2023 with various phases of enforcement. Read more on their efforts in some of our previous articles:

IRS Disallows 20k Questionable Claims, Announces Voluntary Disclosure Program

IRS Follows ERC Moratorium with Claim Withdrawal Process

Moratorium on NEW Employee Retention Credit Claims