As mentioned in a prior Berman Buzz blog, the IRS has reopened the Employee Retention Credit Voluntary Disclosure Program (ERC-VDP) as of August 15, 2024. Unfortunately, the ERC-VDP for 2020 tax periods is no longer available. However, this second program is open through November 22, 2024, for 2021 tax periods.
Advantages of the ERC Voluntary Disclosure Program
If you have received ERC refunds for 2021 tax periods but did not qualify, or if you have received a disallowance letter (105C letter) from the IRS and now want to return the funds, the second ERC-VDP provides the following advantages:
You only need to repay 85 percent of the ERC you received as a credit on your return or as a refund.
You do not need to repay any interest received on your ERC refund.
You do not have to amend income tax returns to reduce wage expenses.
The 15 percent reduction is not taxable income.
The IRS will not impose penalties or interest on the claimed ERC amount if you pay it in full (claimed ERC minus 15 percent) by the time you return the signed closing agreement.
The IRS will not audit the ERC on your employment tax return for tax period(s) resolved within the terms of the second ERC-VDP.
Application Package
If you qualify for the second ERC-VDP, complete the application package and have an authorized individual sign the applicable forms. Submit the package to the IRS using their Document Upload Tool by 11:59 p.m. local time on November 22, 2024.
If you cannot pay the second ERC-VDP amount, you have options for installment agreements and other collection alternatives to pay overtime. Include this additional form with your ERC-VDP application package and supporting documents.
What to Expect Next
Once the IRS receives your application package, they will review your eligibility and send a letter confirming receipt. The letter will indicate whether the IRS will proceed with your application or reject it. If the IRS accepts your application for processing, you can expect the following:
The IRS will mail you a closing agreement. Ensure that only an authorized person signs this agreement.
To avoid penalties and interest, you must pay the balance due by the time you return the signed closing agreement to the IRS.
Return the form(s) to the IRS as instructed.
If you submitted other collection alternative forms (Form 433-B or Form 2750) and all required supporting documentation with your application package, the IRS will contact you to resolve your balance.
Here to Help
Many taxpayers with valid ERC claims may receive a disallowance letter. We recommend responding within 30 days with proof of eligibility to avoid disallowance. If you have outstanding claims that do not meet ERC eligibility requirements, contact us to prevent future compliance issues.
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