Second Employee Retention Credit Voluntary Disclosure Program
- Date
- 2024-08-15
Summary
IRS Announcement 2024-30, in which the Internal Revenue Service announces a second Employee Retention Credit Voluntary Disclosure Program for employers to resolve erroneous ERC claims. The program is limited to claims for the 2021 tax periods where a credit or refund was received prior to August 15, 2024, and sets eligibility conditions, including that the participant is not under criminal investigation or employment tax examination. Under its terms a participant remits 85% of the claimed ERC, keeping 15%, and signs a closing agreement under section 7121 of the Code, with no civil penalties asserted on full payment. The announcement says the first program ended on March 22, 2024 and drew more than 2,600 taxpayers. Applications on Form 15434 are due by November 22, 2024.
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Part IV - Items of General Interest
Second Employee Retention Credit Voluntary Disclosure Program
Announcement 2024-30
Section 1. Purpose and Scope
The Internal Revenue Service (IRS) announces a second ERC Voluntary
Disclosure Program for employers (participants) to resolve erroneous claims for credit
or refund involving 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.
Since the enactment of legislation authorizing ERC claims, the IRS has had
concerns about scams and potential fraud regarding such claims given false and
misleading public advertisements and scams taking advantage of taxpayers. Those
that filed for and erroneously received the ERC face enforcement action from the IRS
and are subject to assessment and collection procedures. The IRS believes that it
would prevail in litigation to recover credits or refunds of erroneous ERC claims and that
the imposition of appropriate penalties and interest would be upheld by a court. The
IRS is offering employers an opportunity to resolve their civil tax liabilities under this
second ERC Voluntary Disclosure Program and avoid potential civil litigation, penalties,
and interest.
In Announcement 2024-3, 2024-2 I.R.B. 364, the IRS announced the first ERC
Voluntary Disclosure Program, which ended on March 22, 2024. More than 2,600
taxpayers applied to the first ERC Voluntary Disclosure Program to resolve their
improper ERC claims and avoid civil penalties and unnecessary litigation. Participants
included common law employers who used a third-party payer to claim the ERC on their
behalf. The first ERC Voluntary Disclosure Program included 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.
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Because the ERC reduces the income tax expense for qualified wages under rules
similar to section 280C of the Internal Revenue Code (Code), the first ERC Voluntary
Disclosure Program also resolved the issue of the corresponding adjustment to income
tax expense for participants.
This second ERC Voluntary Disclosure Program also includes the settlement of
the ERC for purposes of a participant’s employment tax obligations by eliminating their
eligibility for the ERC. However, participants in this second ERC Voluntary Disclosure
Program are allowed to retain 15% of the claimed ERC amount. Participation in the
second ERC Voluntary Disclosure Program is limited to ERC claims filed for the 2021
Tax Period(s) and includes common law employers who used a third-party payer to
claim the ERC on their behalf. This second ERC Voluntary Disclosure Program also
resolves the issue of the corresponding adjustment to income tax expense for
participants. The second ERC Voluntary Disclosure Program, like the first, is intended
to settle erroneous, yet non-willful ERC claims. Taxpayers subject to potential criminal
liability should utilize the IRS Criminal Investigation Voluntary Disclosure Practice.
Section 2. Eligibility
Any participant that has claimed the ERC for tax periods in 2021 and has
received a credit or refund prior to August 15, 2024, is eligible to participate in this
second ERC 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
participant’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 second ERC
Voluntary Disclosure Program;
(4) The participant has not been notified by the IRS that the ERC they received is
being recaptured for any tax period(s) for which the taxpayer is applying for
this second ERC Voluntary Disclosure Program 1; and
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The IRS notifies an employer of ERC recapture by issuing a Letter 6577-C, Employee Retention Credit
(ERC) Recapture.
2
(5) The participant has not previously received notice and demand for repayment
of all or part of the claimed ERC.
A participant that claimed the ERC using a third-party payer (such as an agent
under section 3504 of the Code, a professional employer organization, or a certified
professional employer organization) that claimed the ERC for the participant on an
employment tax return filed under the third-party payer’s own employer identification
number (EIN) rather than the EIN of the participant, may participate in this second ERC
Voluntary Disclosure Program, but the third-party payer must submit the application
described in Section 4 of this announcement on the participant’s behalf.
Section 3. Terms of Second ERC Voluntary Disclosure Program
The terms of this second ERC Voluntary Disclosure Program are as follows:
(1) Employment Tax Adjustments – The participant is not eligible for, or entitled
to, any ERC, including both the refundable and non-refundable portions, for
the tax period(s) at issue.
(2) The participant will remit back to the Department of the Treasury 85% of the
claimed ERC, including both the refundable and non-refundable portions.
(3) The participant will not be required to repay any overpayment interest
received. If the participant makes full payment of 85% of the claimed ERC
prior to executing the closing agreement, no underpayment interest will apply.
If the IRS approves a request for an alternative payment arrangement such
as an installment agreement, interest may apply from the agreement date.
(4) Income Tax Effects – Because the settlement eliminates a participant’s
eligibility for and/or entitlement to all of the claimed ERC, participants are not
required to reduce wage expense with respect to any of the previously
claimed ERC. Consequently, if they had not previously reduced wage
expense by any of the claimed ERC, participants need not file amended
returns or Administrative Adjustment Requests (AARs) to reduce wage
expense. Correspondingly, if they had previously reduced wage expense by
any of the claimed ERC, participants should not reduce wage expense by any
of the claimed ERC if they file an amended return or AAR adjusting the
previous reduction to wage expense. Pursuant to the settlement, a
participant has no income with respect to the resolution of the employment
tax obligation by remittance of payment of only 85% of the claimed ERC,
including both the refundable and non-refundable portions.
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(5) Preparer/Advisor Information – If a return preparer or advisor assisted or
advised the participant with any portion of the claim for credit or refund, the
participant will provide the name, address, and phone number of the
preparer(s) or advisor(s) who assisted with the claim for credit or refund and a
description of services provided by the preparer or advisor.
(6) Application of Penalties – The IRS will not assert civil penalties related to the
underpayment of employment tax attributable to the claimed ERC against a
participant of this ERC Voluntary Disclosure Program under Announcement
2024-30 that remits full payment of 85% of the claimed ERC prior to
executing the closing agreement.
(7) The participant will execute a closing agreement, as more fully described in
Section 4(3) of this announcement.
Section 4. Procedures for Participants in the Second ERC Voluntary Disclosure
Program
(1) Form 15434, Application for Employee Retention Credit Voluntary Disclosure
Program
Participants in this second ERC Voluntary Disclosure Program must notify the
IRS of their election by completing and submitting Form 15434, Application for
Employee Retention Credit Voluntary Disclosure Program, on or before 11:59 pm local
time on November 22, 2024. Participants must submit Form 15434 and any required
attachments electronically via the Document Upload Tool at irs.gov/DUT.
Form 15434 must be prepared under penalties of perjury and:
(a) Include the taxpayer’s name, taxpayer identification number, current
address, and daytime telephone number. If a practitioner will represent
the taxpayer, the practitioner must provide a completed Form 2848, Power
of Attorney and Declaration of Representative;
(b) Identify the tax period(s) for which the ERC was claimed, the form on
which the ERC was claimed, and the full amount of the ERC claimed,
including both the amounts that were refundable and non-refundable;
(c) If the ERC was claimed for the first or second quarters of tax year 2021, a
completed, signed ERC Voluntary Disclosure Program Form SS-10,
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Consent to Extend the Time to Assess Employment Taxes, for the 2021
Tax Period(s), is required to be submitted with Form 15434;
(d) If the ERC was claimed by a third-party payer on behalf of the participant,
as described in Section 2, the third-party payer must attach a copy of the
relevant pages of the Schedule R (Form 941), Allocation Schedule for
Aggregate Form 941 Filers, that was attached to each Form 941,
Employer’s Quarterly Federal Tax Return, on which the third-party payer
claimed the ERC for the participant; and
(e) If a return preparer or advisor assisted with the claim for credit or refund,
include the name, address, and phone number of the preparer(s) and
advisor(s) who assisted with the claim for credit or refund and a
description of services provided by the preparer or advisor.
(2) Payment
Form 15434 will help a participant calculate how much they will be required to
pay to the Department of the Treasury under the terms of the second ERC Voluntary
Disclosure Program.
A participant should use the Electronic Federal Tax Payment System (EFTPS) to
submit an online payment(s). Payment should be made separately for each tax period
upon submission of Form 15434. In EFTPS, participants should select the form they
filed their employment tax return on, such as Form 941 (Form 15434 is not an option in
EFTPS). Then, participants should select “Audit Adjustment” and “Advance Payment of
Tax Deficiency” for “Tax Type.” Participants should not make a single, lump-sum
payment for multiple tax periods to ensure such payments are accurately credited to the
correct tax period. Full payment of the liabilities under this second ERC Voluntary
Disclosure Program should be made by the date the closing agreement described in
subsection (3) is executed by the participant. Participants who are unable to remit full
payment of the 85% of claimed ERC may be considered for an alternative payment
arrangement such as an installment agreement, pending approval.
(3) Closing Agreement
After receiving the requested information, the IRS will prepare a closing
agreement under section 7121 of the Code in accordance with the terms of the
settlement.
The IRS will mail the closing agreement to the participant who must sign and
return it to the IRS within 10 days of the date of mailing by the IRS. The IRS may grant
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an extension for good cause to participants who request additional time within the 10-
day period. Full payment of the liabilities under this second ERC Voluntary Disclosure
Program should be made by the date the closing agreement is executed by the
participant.
As discussed in Section 4(2), participants who are unable to remit full payment of
the liabilities under this second ERC Voluntary Disclosure Program may be considered
for an alternative payment arrangement such as an installment agreement, pending
approval.
(4) Other Matters
(a) Denial of a participant's request to participate in this second ERC
Voluntary Disclosure Program is not subject to judicial review or
administrative appeal.
(b) Execution of a closing agreement under this second ERC Voluntary
Disclosure Program does not preclude the IRS from investigating any
associated criminal conduct or recommending prosecution for violation of
any criminal statute and does not provide any immunity from prosecution.
CONTACT INFORMATION
The principal author of this announcement is Michael Franklin of the Office of the
Associate Chief Counsel (Procedure and Administration). If you need help completing
Form 15434, have questions on the status of your ERC Voluntary Disclosure Program
application, or have other ERC Voluntary Disclosure Program related questions, contact
the ERC Voluntary Disclosure hotline at 414-231-2222 (not a toll-free number).
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