ArticlesAugust 23, 20243 min read

IRS opens new round of ERC voluntary disclosure ending November 22

Business people in large modern meeting room

Andrew Seifert

Partner, Wipfli Advisory LLC

Tax

On August 15, 2024, the IRS released Announcement 2024-30 informing taxpayers of a second round of the Employee Retention Credit Voluntary Disclosure program (ERC-VDP).

The ERC-VDP is a program developed by the IRS aimed at assisting employers who received but were not entitled to employee retention credits (ERC) to self-identify and repay that ERC.

Here’s what you need to know about this program to rectify ERC-related eligibility errors before the second round ends on November 22, 2024:

ERC-VDP second round overview

Many parts of the second round disclosure are similar to the first round disclosure which ended on March 22, 2024. A few key differences are that the repayment percentage was increased from 80% to 85% and only ERC claims for 2021 can be submitted.

A taxpayer who used a third-party payroll agent to submit ERC claims is eligible to participate in the second ERC-VDP, but the application must be submitted by the third party on the taxpayer’s behalf.

Key points of the program include:

Eligibility criteria
  • Employers who previously claimed and received ERC but have determined they were not eligible for ERC for some or all quarters in 2021
  • Not under criminal investigation and have not been notified of the intent to begin investigation
  • Not under employment tax examination (audit) for any tax period for which taxpayer is applying for second ERC-VDP
  • Taxpayer has not received Letter 6577-C from the IRS informing of intent to recapture ERC for any tax period for which taxpayer is applying for second ERC-VDP
  • Taxpayer has not received notice and demand for payment of all or part of the claimed ERC
  • Taxpayer has not previously filed an amended employment tax return to eliminate the ERC claim

Benefits of participation
  • Repayment of ERC is reduced to 85%.
  • No interest or penalties will be assessed, provided full repayment is made no later than when the signed ERC-VDA closing agreement is sent to the IRS.
  • The 15% payment reduction is not taxable income.

ERC disclosure process
  • Employers must submit Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, by November 22, 2024.
  • If filing for the first or second quarter of 2021, Form SS-10, Consent to Extend Time to Assess Employment Taxes, must be submitted with Form 15434.
  • Applicants must use online filing at IRS.gov/dutand click the blue “Use the Document Upload Tool” box.
  • The IRS recommends advance payment of ERC amounts at the time of application using the Electronic Federal Tax Payment System(EFTPS) but they do not require it.
  • The IRS will review the application package and verify eligibility for the ERC-VDP. If approved, the IRS will provide a letter with next steps and a closing agreement.
  • Unless approved for an installment agreement, full payment of anyamount due must be made at the time of signing the ERC-VDP closing agreement.

How Wipfli can help

The second ERC-VDP offers employers another opportunity to rectify ERC-related eligibility errors. By voluntarily disclosing discrepancies, employers can help ensure compliance and benefit from the intended tax relief.

Wipfli can help. We apply our extensive tax experience and knowledge of the ERC to help you assess whether using ERC-VDP is the right decision for your business.   

Contact us today.