On Thursday, December 21, 2023, the Internal Revenue Service (IRS) announced a new Voluntary Disclosure Program designed to help taxpayers who were misled into filing ineligible Employee Retention Credit (ERC) Claims return the funds at a discounted rate.

This program is available to all who have claimed an ERC, if and only if:

  • The taxpayer/participant/employer (Taxpayer) is not under criminal investigation, and they have not been notified that the IRS intends to commence a criminal investigation;
  • The IRS has not received information from a third party alerting the IRS to the Taxpayer’s noncompliance, nor has the IRS acquired information directly related to the noncompliance from an enforcement action;
  • The Taxpayer is not under an employment tax examination by the IRS for any tax period(s) for which the Taxpayer is applying for this Voluntary Disclosure Program; and
  • The Taxpayer has not previously received notice and demand for repayment of all or part of the claimed ERC.

Under this new program, the Taxpayer will be in the best position to be whole, even where the promoter is not returning the commission paid by the Taxpayer.

A Summary of the ERC Voluntary Disclosure Program

In brief, the program provides for the following treatment:

  1. Taxpayer will not be eligible for any ERC for any period to which this program applies
    1. The entire ERC for the period must be deemed ineligible by the Taxpayer
  2. Taxpayer will remit to the Department of Treasury 80% of the claimed ERC
  3. Taxpayer will not be required to repay any overpayment interest received when the ERC was paid
  4. If full repayment (80%) is received by the date the closing agreement is signed, no underpayment interest will be imposed
  5. Income Tax Effects -- Pursuant to the settlement, a Taxpayer has no income with respect to the resolution of the employment tax obligation by remittance of payment of only 80% of the claimed ERC, including both the refundable and non-refundable porti
    1. Example:
      1. Taxpayer received $100,000 of ineligible ERC
      2. Taxpayer applied for the program and returned $80,000
      3. Taxpayer has not amended the original Income Tax Return (no adjustment is required because the remaining $20,000, which Taxpayer was not required to repay, is not considered income to the Taxpayer)
  6. The Taxpayer MUST provide the name, address, and phone number of the preparer(s) or advisor(s) who assisted with the claim for credit or refund and a description of services provided by the preparer or advisor.
  7. The IRS will not assert civil penalties related to the underpayment of employment tax attributable to the claimed ERC against a Taxpayer of this Voluntary Disclosure Program under Announcement 2024-3 that remits full payment of 80% of the claimed ERC prior to executing the closing agreement.
  8. The Taxpayer will execute a closing agreement

How and when to apply for the ERC Voluntary Disclosure Program:

Don't forget that there is still time to:

Please contact your Delap advisor to be connected with our team that can guide you through this ERC Voluntary Disclosure Program process.