Overview of Second ERC Voluntary Disclosure Program

IRS announces another opportunity to disclose and repay improper ERC claims

On August 15, 2024, the IRS announced the launch of the Second Employee Retention Voluntary Disclosure Program (ERC-VDP). The window for submitting applications is open from August 15, 2024, until 11:59 p.m. on November 22, 2024.

Details and requirements for Second ERC-VDP

Details

The Second ERC-VDP will permit the repayment of 85% of the claim received. 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, pending submission and review of Form 433-B, Collection Information Statement for Businesses and supporting documentation.

• Eligible businesses who timely repay will not be charged interest or penalties. However, businesses who cannot pay 85% of the credit at the time of signing the closing agreement will be required to pay penalties and interest connected to a payment arrangement such as an installment agreement.

What are the requirements?

• Your business cannot be under criminal investigation or have been notified the business is under criminal investigation.
• Your business must not have applied for the First ERC-VDP for the same tax periods. Note: The IRS continues to process First ERC-VDP applications.
• The IRS must not have received any third-party information about the participant’s noncompliance.
• Your business must not be under an employment tax examination for any tax period(s) in which it is applying for the Second ERC-VDP.
• Your business has not been notified that the ERC is subject to recapture for the tax period(s) pertaining to the Second ERC-VDP.
• Your business has not received notice and demand for repayment for all or part of the claimed ERC.
• Your business has not already filed an amended return to eliminate the ERC.

Second ERC-VDP application process

If your business meets the eligibility requirements referenced above, the next step is to submit an application.

1. Complete Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program.
2. Submit your application using the IRS Document Upload Tool by 11:59 p.m. on November 22, 2024
3. Employers are expected to repay their full ERC, minus the 15% reduction allowed through the VDP. Under certain conditions, employers who are not able to pay the amount in full will have the option to set up an installment agreement.
4. Taxpayers that need to request an installment agreement, must include Form 433-B, Collection Information Statement for Businesses with their application. Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty must also be submitted since the business 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 the Second ERC-VDP application.

Note: If your business used a third-party payer (also known as PEO or CPEO) to file your employment tax returns or claim your ERC, your business can’t apply to the ERC-VDP. The third-party payer needs to apply on your behalf.

Application resources and FAQs

Need more information? The IRS created new ERC-VDP and FAQs resource pages to provide information on the advantages of participating in the Second ERC-VDP, application requirements, next steps, and more.

Background

Our article, “Employee Retention Credit Repayment Option for Businesses,” discusses the Employee Retention Credit, associated taxpayer issues, and the IRS’s First ERC-VDP designed to help businesses that incorrectly claimed the credit. The First ERC-VDP expired March 22, 2024.

We will continue to provide information on new or changing ERC regulations that may impact you and your business.

Contact your Keiter Opportunity Advisor with any questions or to discuss your specific situation.