IRS Announces Employee Retention Credit Settlement Program Allowing Employers Who Received Improper ERC Refunds to Repay at a 20% Discount

As part of an ongoing initiative aimed at combating dubious Employee Retention Credit (ERC) claims, on December 21, 2023, the Internal Revenue Service launched a new Voluntary Disclosure Program to help businesses who want to pay back the money they received after filing ERC claims in error. The special disclosure program runs through March 22, 2024, and the IRS added provisions only requiring repayment of 80% of the claim received.

If the IRS paid interest on the employer’s ERC refund claim, the employer doesn’t need to repay that interest, nor will the IRS charge interest or penalty on the repayment amount. Employers who are unable to repay the required 80% of the credit may be considered for an installment agreement on a case-by-case basis.

Any employer who already received the ERC for a tax period and questions their eligibility can apply if the following requirements are met:

1. The employer is not under criminal investigation and has not been notified that they are under criminal investigation.
2. The employer is not under an IRS employment tax examination for the tax period for which they’re applying to the Voluntary Disclosure Program.
3. The employer has not received an IRS notice and demand for repayment of all or part of the ERC.
4. 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.

To qualify for this program, the employer must provide the IRS with the names, addresses and telephone numbers of any advisors or tax preparers who advised or assisted them with their claim and details about the services provided.

To apply, the employer must file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program.

The IRS is also continuing to accept and process requests to withdraw an employer’s full ERC claim under the special withdrawal process. Certain employers with pending ERC claims may participate in the withdrawal program by sending the withdrawal request.

An employer who is looking to pay back the ERC refunds or withdrawing the claims needs to make sure to notify their tax advisor so they could amend the prior year tax return(s) to deduct the wages expense that was previously disallowed.

For assistance with applying to the Voluntary Disclosure Program or filing a withdrawal request, please contact your Anchin Relationship Partner.