IRS Launches New Limited-Time Voluntary Disclosure Program for Businesses that Incorrectly Claimed Employee Retention Credit

The IRS has announced a limited-time reopening of the Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP), allowing businesses that incorrectly claimed the ERC to rectify their mistakes. The program runs through November 22, 2024, and it offers businesses a 15% “discount” on repayments and the chance to avoid future audits, penalties, and interest.

The IRS emphasized that the VDP allows businesses to correct improper claims before the agency intensifies its compliance actions. IRS plans to send up to 30,000 “clawback” notices to businesses with the goal of recapturing more than $1 billion in improper ERC claims. Those who receive a “clawback” notice cannot participate in the VDP. Thousands more letters will be sent out this fall as part of the ongoing compliance work. The IRS has already taken steps to disallow $5 billion in improper payments while also moving 50,000 valid claims into the payment pipeline.

The Service has also stated that it has thousands of open audits underway and that it currently has initiated 460 criminal cases. It states that these 460 criminal cases alone have potential fraudulent claims with nearly $7 billion. Businesses considering participating in the VDP should consider contacting competent tax counsel.