IRS Announces Short-Term Voluntary Disclosure Program For Employee Retention Credits

On Dec. 21, 2023, the Internal Revenue Service (IRS) announced a new voluntary disclosure program (VDP) for taxpayers who have received an employee retention credit (ERC) refund for which they might not have been eligible. Eligible taxpayers wishing to participate in the VDP must apply by March 22, 2024. This VDP is a civil settlement program separate from the IRS Criminal Division Voluntary Disclosure Practice. Taxpayers accepted into the VDP must pay back 80% of the ERC that was refunded to them. In addition to allowing eligible participants to keep 20% of the claimed ERC refund, the IRS will not require taxpayers to pay interest or penalties on the amount of the ERC repaid to the IRS (provided it is paid when the taxpayer enters into a closing agreement with the IRS), nor to amend income tax returns to reduce any wage expense pursuant to the amount of the ERC refund the taxpayer is allowed to keep. The IRS may be using this VDP to obtain information from taxpayers