Executive Summary
On Dec. 21, 2023, the IRS announced the launch of the highly-anticipated employee retention credit (ERC) voluntary disclosure program (VDP) and an accompanying series of frequently asked questions. The VDP is the latest effort by the IRS to combat aggressive marketing and fraudulent activity surrounding the credit, after previously announcing a moratorium on processing new credits (Sept. 18, 2023 Tax Alert), launching a separate program that allows taxpayers to return uncashed checks for ERCs claimed (Nov. 06, 2023 Tax Alert), and issuing 20,000 claim denial letters to taxpayers earlier in December. Eligible taxpayers have until March 22, 2024 to apply to the VDP, and those accepted will repay 80% of the credits they claimed without interest or penalties in exchange for providing information about any advisors or tax preparers who advised them in pursuing the ERC.
Key Takeaways
- Any taxpayer who has received the ERC is eligible to participate (including those who have cashed or deposited their refund), so long as:
- They are not under criminal investigation, and have not been notified that the IRS intends to begin a criminal investigation,
- The IRS has not been alerted to the taxpayer’s noncompliance,
- The taxpayer is not under employment tax audit for any tax period for which they are applying for the VDP, and
- The taxpayer has not received a notice and demand for repayment of the ERC.
- The deadline to apply to the VDP is March 22, 2024. Accepted applicants will not pay interest and penalties if they can repay 80% of the credits claimed in full. Taxpayers who cannot repay in full can enter into an installment agreement, though interest and penalties may apply.
