Since 2020, fraudsters have lured unwary taxpayers into falsely claiming and receiving the Employee Retention Tax (ERC) tax credit. Everyone—even victims of scams—not eligible for the ERC must repay it, possibly with penalties and interest.
To encourage repayment, the IRS launched the ERC Voluntary Disclosure Program, which allows taxpayers to pay back only 80% of the ERC credit or refund they received.
The program is open through March 22, 2024.
How to Participate in the ERC Voluntary Disclosure Program
Participants in the program agree to:
- Voluntarily pay back the ERC, minus 20%
- Provide the IRS with any information requested
- Sign a closing agreement
There are several benefits to the Voluntary Disclosure Program:
- In addition to repaying only 80% of the ERC you received, the 20% reduction is not taxable as income.
- You don’t need to repay any interest earned on your ERC refund, nor do you have to amend income tax returns to reduce wage expense.
- If you repay the full amount—80% of the ERC—before returning your signed closing agreement, you won’t be charged penalties or interest on the ERC amount you claimed.
Who Can Apply?
You are eligible to apply for the program for each tax period if you:
- Received a refund or tax credit
- Now think you are not entitled to any ERC
- Are not being audited or under criminal investigation by the IRS
- Were not notified that the IRS was disallowing your ERC.
You must meet all the above criteria to be able to apply. If you’re not eligible because your ERC hasn’t been paid, you may be able to withdraw your ERC claim instead.
The IRS created the ERC Voluntary Disclosure Program to protect honest taxpayers who ran afoul of ERC promoters. These scammers charge business owners exorbitant fees for help claiming the ERC, for which they may or may not be eligible.
We rarely see the IRS offer help on such a scale, and we encourage eligible businesses to take advantage of it now. The clock is ticking down to the March 22 deadline and will be here before you know it.
If you have questions about your eligibility for the program or need help claiming the ERC credit, let’s talk.
Meet the Author
Sara Northcutt, CPA
Aldrich CPAs + Advisors LLP
Sara Northcutt joined the firm in 2005 and has more than a decade of experience working on a wide range of clients, including financial lending, private equity, real estate, and other closely held businesses. Sara specializes in multi-state tax compliance. Sara received her Bachelor of Arts degree from Vanguard University of Southern California and did her... Read more Sara Northcutt, CPA
- Closely-held businesses
- Certified Public Accountant
- Strategic tax planning and compliance