[co-author: Samuel Brady]

On December 21, 2023, the IRS announced a new Voluntary Disclosure Program (the “Program”), allowing employers (both businesses and not-for-profits) who received the Employee Retention Credit (“ERC”) to repay 80% of the claimed ERC without penalty and interest provided they meet certain requirements.

Eligibility

An employer is eligible for the ERC voluntary disclosure program if:

• Application to the Program is made on or before March 22, 2024;
• The employer is not under criminal investigation and has not been notified that they are under criminal investigation;
• The employer is not under an IRS employment tax examination for the tax period for which they're applying to the Voluntary Disclosure Program;
• The employer has not received an IRS notice and demand for repayment of part or all of the ERC; and
• The IRS has not received information from a third party that the taxpayer is not in compliance or has not acquired information directly related to the noncompliance from an enforcement action.

How to Apply

To apply for the Program, employers must file IRS Form 15434, Application for Employee Retention Credit (ERC) Voluntary Disclosure Program, which requires the employer to list the amount of the credit by period and identify any advisors who advised on or assisted with, the preparation or filing of the ERC claim.

Further, the employer must repay 80% of the claimed ERC but is not required to amend their tax returns (e.g., IRS Forms 1120, 1120S, or 1065, or schedule C of Form 1040) to increase the amount of employee wages, which will significantly simplify compliance and help resolve many issues with the ERC without requiring multiple returns to be amended. After receiving the application, the employer will execute a closing agreement. The closing agreement will not preclude IRS investigation for criminal liability or provide immunity from prosecution; however, for most employers, it is extremely unlikely that the IRS will commence further action relating to the ERC. Due to the lack of a shield from criminal liability, it is strongly recommended that employers speak with an attorney regarding the specifics of their situation.