Cross References

  • Announcement 2024-3

The IRS has announced a Voluntary Disclosure Program to resolve erroneous claims for the Employee Retention Credit (ERC). The ERC is a refundable tax credit intended for businesses and tax-exempt organizations that continued paying employees during the COVID-19 pandemic if their operations were fully or partially suspended due to a government order, they experienced the required decline in gross receipts, or they were a recovery startup business during the relevant eligibility periods.

There has been reported scams and fraudulent claims regarding ERC that gave false and misleading information to the public. Taxpayers who filed for and erroneously received the ERC face enforcement action from the IRS and are subject to assessment and collection procedures. The IRS will prevail in any litigation to recover credits or refunds of erroneous ERC claims and will impose appropriate penalties and interest against such claims.

For efficient tax administration reasons, the IRS is offering taxpayers an opportunity to resolve their civil tax liabilities under a Voluntary Disclosure Program and avoid potential civil litigation, penalties, and interest.

This Voluntary Disclosure Program includes the settlement of the ERC for purposes of a participant’s employment tax obligations by eliminating their eligibility for the ERC while allowing a participant to retain 20% of the claimed ERC amount. Additionally, because the ERC reduces the income tax expense for qualified wages, this Voluntary Disclosure Program resolves the issue of the corresponding adjustment to income tax expenses for participants, which include common law employers who used a third-party payer to claim the ERC on their behalf.

Any participant that has claimed the ERC and has received a credit or refund is eligible to participate in this Voluntary Disclosure Program, provided that: 1) The participant is not under criminal investigation and they have not been notified

that the IRS intends to commence a criminal investigation,

2) The IRS has not received information from a third party alerting the IRS to the par-

ticipant’s noncompliance, nor has the IRS acquired information directly related to the noncompliance from an enforcement action,

3) The participant is not under an employment tax examination by the IRS for any tax

period(s) for which the taxpayer is applying for this Voluntary Disclosure Program, and

4) The participant has not previously received notice and demand for repayment of all or

part of the claimed ERC.

If a taxpayer believes he or she received the ERC in error and fits the requirements listed above, see Announcement 2024-3 for details on how to participate in this Voluntary Disclosure Program.

The web address for Announcement 2024-3 is https://www.irs.gov/pub/irs-drop/a-24-03.pdf.