The Employee Retention Credit Voluntary Disclosure Program (ERC-VDP) allows employers who received ERC payments but were ineligible for them to repay the credits at a discounted rate. The program runs through March 22, 2024.
This program was developed by the IRS, allowing certain taxpayers who received (but were not entitled to) any non-refundable or refundable Employee Retention Credit(s) (ERC) to self-identify and pay back the funds.
As a participant of ERC-VDP, you’ll be required to:
- Apply to the program with Form 15434, Application for Employee Retention Credit (ERC) Voluntary Disclosure Program,
- Cooperate with any requests made by the IRS, including those for additional information,
- Pay back the entire ERC received (minus 20%) voluntarily, and
- Sign a closing agreement to finalize the matter.
If you resolve ERC within the program terms, you will not be subject to an employment tax audit for the funds.
Another advantage of this program is that a reduction of the wage expense on the income tax return isn’t required. The settlement eliminates the participant’s entitlement to the claimed ERC.
Throughout these FAQs, reference to “ERC” means both non-refundable and refundable portions of ERC.
The non-refundable portion of the ERC can reduce tax liability to zero, but the refundable portion of the ERC can reduce your total tax liability below zero. If the amount of your credit exceeds the tax you owe on the employment tax return, the IRS repays it as a refund.
For more information regarding ERC-VDP: Frequently Asked Questions about the Employee Retention Credit Voluntary
This article is informational and does not constitute legal or financial advice. Consult with an employment lawyer or accountant for additional clarification on how these changes impact your company.
