The Employee Retention Credit Voluntary Disclosure Program (ERC-VDP) lets employers who received ERCs but are ineligible for them pay back the credits at a discounted rate. The program runs through March 22, 2024.
The ERC-VDP is a program developed by the IRS that allows certain taxpayers who received but were not entitled to any non-refundable or refundable Employee Retention Credit(s) (ERC) to self-identify and repay that ERC.
As a participant of ERC-VDP, you’ll be required to:
- Apply to the ERC-VDP program using Form 15434, Application for Employee Retention Credit (ERC) Voluntary Disclosure Program,
- Cooperate with the IRS, such as for any requests for more information,
- Voluntarily pay back the entire ERC received, minus 20%, and
- Sign a closing agreement, which provides finality to the matter.
You will not be subject to an employment tax audit for ERC resolved within the terms of this program.
Another benefit of ERC-VDP is that a reduction to your wage expense on your income tax return is not required, as the settlement eliminates a participant’s entitlement to the claimed ERC.
Throughout these FAQs, reference to “ERC” means both non-refundable and refundable portions of ERC.
The nonrefundable portion of the ERC can reduce your 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 pays it to you as a refund.
For more information regarding ERC-VDP: Frequently Asked Questions about the Employee Retention Credit Voluntary