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Employee Retention Credit Voluntary Disclosure Program (ERC-VDP) Closing on November 22, 2024

By Melanie Powell |

The second Employee Retention Credit Voluntary Disclosure Program (ERC-VDP) is closing on November 22, 2024. Continue reading to learn more about the program, key benefits, and how to apply if eligible.

The ERC-VDP

The ERC-VDP was introduced by the IRS to address issues arising from ineligible claims for the Employee Retention Credit (ERC). The ERC was initially created to help businesses keep employees on their payroll during the COVID-19 pandemic by offering a refundable tax credit. However, as the program progressed, some businesses were misled by aggressive marketing tactics into claiming credits they weren’t entitled to. To rectify this, the IRS launched the ERC-VDP allowing businesses to voluntarily repay the ERC at a discounted rate and avoid penalties and interest. The first ERC-VDP ran from December 22, 2023, to March 22, 2024, and the second program started on August 15, 2024, and will run until November 22, 2024.

What does it do?

  • Encourage compliance: By offering a way to correct ineligible claims without severe financial repercussions.
  • Reduce audits: Participants who repay the ERC through the VDP will not be subject to audits for the periods covered by the program.
  • Simplify repayment: Businesses only need to repay 85% of the ERC received, avoiding the need to amend income tax returns to adjust wage expenses.

Key benefits

  • Discounted repayment: Only repay 85% of the ERC received.
  • No penalties or interest: Avoid penalties and interest if the repayment is made in full by the deadline.
  • Audit protection: The IRS will not audit the ERC for the tax periods covered by the program.
  • Simplified process: No need to amend income tax returns to reduce wage expenses.

Eligibility

  • The ERC was claimed and received for 2021 tax periods.
  • The ERC was processed and paid as a refund or credit.
  • The entity is not under IRS employment tax examination or criminal investigation.
  • If you used a third-party payer to file your employee tax returns or claim your ERC, you can’t apply to the second ERC-VDP yourself. You must contact the third-party payer to apply.

Learn more about determining eligibility on the IRS website.

How to apply

  1. Complete and submit the application package for the second ERC-VDP.
  2. Voluntarily repay the ERC, minus 15%.
  3. Cooperate with any IRS requests for additional information.
  4. Sign a closing agreement with the IRS.
The program is open until November 22, 2024. For more information and assistance with your application package, please consult with a trusted Perkins tax professional.