Employee Retention Credit Voluntary Disclosure Program (ERC-VDP)

January 10, 2024

By: Taylor M. Bickley, CFO Advisory Manager

As most businesses are aware, the IRS placed a moratorium on the processing of ERC (Employee Retention Credit) claims as of September 14, 2023. The primary focus of the IRS’s moratorium was to halt fraudulent and excessive claims being filed by credit firms specializing in ERC. These firms proactively solicit companies through aggressive marketing strategies and charge contingent fees for the claims generated.

On December 21, 2023, the IRS issued Announcement 2024-3, releasing its new initiative called the Voluntary Disclosure Program (ERC-VDP). The inception of this program aims to assist businesses in rectifying tax liabilities, mitigating the risk of litigation, and avoiding penalties and interest incurred due to incorrectly obtaining ERC.

Employee Retention Credit Voluntary Disclosure Program (ERC-VDP) Details and Terms:

This program will allow businesses to pay back 80% of the ERC claimed to the Department of Treasury (including refundable and refundable portions). After the IRS receives and approves the documentation, they will prepare a closing agreement that needs to be signed within 10 days. The IRS does not require the business to repay interest received on the refunds.

If the business is unable to make the full 80% payment and the IRS approves an agreed upon installment agreement, interest and penalties may apply.

Who is eligible for the ERC-VDP?

A business that has already received a refund which has been cashed, deposited, or the credit has been applied to a future tax period.
The business was entitled to $0 ERC.
The IRS has not received information from 3^rd parties alerting the IRS to the businesses’ noncompliance.
The business has not received an IRS notice requesting repayment for part or all the claims.
The business is not under criminal investigation or IRS examination.
The business is not under employment tax examination by the IRS for any tax period for the credit claimed.
The business has not previously amended their employment tax return to eliminate the ERC Claim (before December 21, 2023).

How to participate the ERC-VDP?

To participate in the program, the business must submit Form 15434 (Application for Employee Retention Credit (ERC) Voluntary Disclosure Program) on or before March 22, 2024. After submitting the application, the business must cooperate and comply with any additional information requests from the IRS. In Announcement 2024-03, the business must provide the following information:

Taxpayer information and if the taxpayer will be represented by a practitioner (Form 2848 will be required).
Identify the tax period(s) that were claimed for ERC, which form was used, and the amount claimed.
If the claim was for 2020, the business needs to provide a signed ERC-VDP Form SS-10 (Consent to Extended the Time to Assess Employment Taxes)

Note: A participant who claimed ERC using a third-party can participate if the third-party submits the application.

For businesses that are still awaiting their ERC refunds, we recommend being patient during this time. Due to the moratorium and increased scrutiny around ERC, the delay in issuing refunds has been extended. Please be aware that before the moratorium was put into effect the IRS had over 560,000 unprocessed 941Xs. As of December 9, 2023, the IRS had over 1,057,000 unprocessed 941Xs.

If you have any questions about ERC, please contact Taylor Bickley who can assist you further.

The IRS has released the following information and updated guidance here:

IRS Release: https://www.irs.gov/pub/irs-drop/a-24-03.pdf

Frequently Asked questions: https://www.irs.gov/coronavirus/frequently-asked-questions-about-the-employee-retention-credit-voluntary-disclosure-program#eligibility1

IRS Article: https://www.irs.gov/coronavirus/employee-retention-credit-voluntary-disclosure-program