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IRS Provides Details of Second Employee Retention Credit Voluntary Disclosure Program

The Internal Revenue Service (IRS) issued a notice urging businesses that have received Employee Retention Credit (ERC) payments to recheck eligibility requirements and consider the second ERC Voluntary Disclosure Program (VDP) to resolve incorrect claims without penalties and interest. The second ERC VDP will run through November 22, 2024, and will allow businesses to correct improper payments and avoid future audits, penalties, and interest.

Applicants that the IRS accepts into the program will need to repay only 85% of the credits they received. This second round is open for tax periods in 2021—employers can’t use the second VDP to disclose and repay ERC money from tax periods in 2020. If the IRS paid interest on the employer’s ERC refund claim, the employer does not need to repay that interest. Employers who are unable to repay the required 85% of the credit may be considered for an Installment Agreement on a case-by-case basis. The IRS will not charge program participants interest or penalties on any credits they timely repay. However, if an employer can’t repay the required 85% of the credit at the time they sign their closing agreement, they’ll be required to pay penalties and interest in connection with an alternative payment arrangement such as an installment agreement. The IRS has provided a set of Frequently Asked Questions about the second ERC Voluntary Disclosure Program to help employers understand the terms of the program.

To apply, employers must file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, and submit it through the IRS Document Upload Tool.

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