Employee Retention Credit - Voluntary disclosure program

Program closed Nov. 22, 2024. Information on this page is no longer current.

If you claimed and received the Employee Retention Credit (ERC) for 2021 tax periods, but you are ineligible and need to repay the ERC, this page will help you figure out if you can apply for the second Employee Retention Credit Voluntary Disclosure Program (second ERC-VDP) and how to do that.

The second ERC-VDP is open through Nov. 22, 2024, for 2021 tax periods. The ERC-VDP for 2020 tax periods is no longer available. The second ERC-VDP program requires you to:

• Complete and send an application package for the second ERC Voluntary Disclosure Program,
• Voluntarily pay back the ERC, minus 15%
• Cooperate with any requests from the IRS for more information, and
• Sign a closing agreement.

If you need help checking your eligibility for the credit itself, check these resources:

• The Employee Retention Credit Eligibility Checklist
• News release IR-2024-198, Warning signs of incorrect claims for ERC
• Frequently asked questions (FAQ) about the ERC

For additional information about the program open through Nov. 22, 2024 see the Frequently asked questions on the second ERC-VDP.

Work with a trusted tax professional if you need help or advice on this process or on the ERC.

On this page

• Advantages of the second ERC Voluntary Disclosure Program
• Who can apply to the second ERC Voluntary Disclosure Program
• How to apply to the second ERC Voluntary Disclosure Program
• What happens next

Advantages of the second ERC Voluntary Disclosure Program

There are several benefits to participating in the second ERC-VDP if you received the ERC for 2021 tax periods but weren’t entitled to it and now want to pay the money back. If you apply to the second ERC-VDP:

• You need to repay only 85% of the ERC you received as a credit on your return or as a refund.
• You don’t need to repay any interest you received on your ERC refund.
• You don’t have to amend income tax returns to reduce wage expense.
• The 15% reduction is not taxable as income.
• The IRS will not charge penalties or interest on the claimed ERC amount if you pay it in full (claimed ERC minus 15%) by the time you return your signed closing agreement to IRS.
• The IRS won’t examine (audit) ERC on your employment tax return for tax period(s) resolved within the terms of the second ERC-VDP.

Who can apply to the second ERC Voluntary Disclosure Program

Businesses, tax-exempt organizations and government entities are eligible to apply for the second ERC-VDP for each tax period in 2021 that meets all of the below listed requirements.

• Your ERC claimed on a 2021 employment tax return has been processed and paid as a refund, which you have cashed or deposited, or paid in the form of a credit applied to the tax period or another tax period.
• You now think that you were entitled to $0 ERC.
• You’re not under employment tax examination (audit) by the IRS.
• You’re not under criminal investigation by the IRS.
• The IRS has not reversed or notified you of intent to reverse all or part of your ERC. For example, you received a letter or notice from the IRS disallowing your ERC.

If you used a third-party payer to file your employment 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.

For more details about second ERC-VDP eligibility see Who is eligible for the second ERC-VDP.

Please note that if you willfully claimed an ERC that is fraudulent, or if you assisted or conspired in such conduct, applying to the second ERC-VDP will not exempt you from potential criminal investigation and prosecution.

If you’re not eligible to participate in the second ERC-VDP because your ERC hasn’t been paid, you may be able to use the ERC claim withdrawal process or amend a return instead.

How to apply to the second ERC Voluntary Disclosure Program

If you meet the eligibility rules for the second ERC-VDP, complete an application package by:

• Preparing Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program,
• Preparing ERC-VDP Form SS-10, which is included within the Form 15434
• Ensuring that an authorized person signs your second ERC-VDP application and ERC-VDP Form SS-10, and
• Following the steps in How do I submit my second ERC-VDP application package? to submit your application using the IRS Document Upload Tool by 11:59 p.m. local time on Nov. 22, 2024.

Note: If you are unable to pay your full second ERC-VDP amount, you can ask the IRS to consider you for an installment agreement to pay over time or other collection alternative. If you need to apply for an installment agreement, include Form 433-B, Collection Information Statement for Businesses PDF, in your second ERC-VDP application package along with all required documents to support your Form 433-B. Be sure Form 433-B is signed by an authorized person.

Additionally, you must sign and submit Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty PDF, since your tax liability may be subject to the trust fund recovery penalty (TFRP). All potentially responsible persons for the business entity must submit their own Form 2750 with your second ERC-VDP application. All requests for an installment agreement or other collection alternative are subject to approval and will be considered on a case-by-case basis.

If you need to change an address or add a power of attorney, include the applicable forms in your package too. See What do I include in my application package and how do I prepare it? for more details about these forms.

What happens next

The IRS will review your application package and verify your eligibility for the second ERC-VDP. We will mail you a letter letting you know we received your application and whether we can proceed with your application or if it was rejected.

If we can proceed:

• The IRS will mail you a closing agreement.
• You need to pay the balance due by the time you return your signed closing agreement to avoid penalties and interest.
• An authorized person must sign the closing agreement
• Return the form(s) to the IRS.

Note: If you are unable to pay your full second ERC-VDP amount, and if you submitted a Form 433-B, Form 2750, and all required supporting documentation with your application package, then the IRS will contact you to resolve your balance.

After the IRS receives your signed closing agreement, we will adjust your account to reflect the eliminated ERC amount. Do not submit amended returns correcting your ERC.

The terms of the second ERC-VDP closing agreement can’t be appealed.

If your application is rejected, the letter will explain why and offer potential solutions. You may be able to correct the error and resubmit your second ERC-VDP application package, or you may file an amended employment tax return.

Resources

• Second ERC Voluntary Disclosure Program FAQs
• Employee Retention Credit Eligibility Checklist: Help understanding this complex credit
• Frequently asked questions about the Employee Retention Credit, including eligibility and the withdrawal process
• First ERC Voluntary Disclosure Program FAQs, for historical information
• IRS Document Upload Tool
• Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program
• IR-2024-212, IRS reopens Voluntary Disclosure Program to help businesses with problematic Employee Retention Credit claims; sending up to 30,000 letters to address more than $1 billion in errant claims
• IR-2024-213, IRS provides details of second Employee Retention Credit Voluntary Disclosure Program; program for improper claims open through Nov. 22
• IR-2024-198, IRS shares more warning signs of incorrect claims for the Employee Retention Credit; urges businesses to proactively resolve erroneous claims to avoid penalties, interest, audit