How to Apply for the Second ERC Voluntary Disclosure Program?

With the announcement of the second Employee Retention Credit (ERC) Voluntary Disclosure Program (ERC-VDP) for 2021 tax periods, businesses, tax-exempt organizations, and government entities now have an opportunity to correct ineligible ERC claims. If you’re ready to take advantage of this program, understanding the application process is important.

In this guide, we’ll walk you through the steps required to submit your application, making sure that you meet all the necessary criteria to resolve your ERC claims effectively and avoid any potential penalties or interest.

What are the advantages of the second Voluntary Disclosure Program?

Before we get to the step-by-step process of applying for the VDP, you must know that participating in this program provides your business with several advantages if you need to repay the ERC that you were paid but were not entitled to.

• Reduced repayment amount.
  You repay only 85% of the ERC you received. This means you keep 15% of the ERC amount, which is not taxable as income.
• No interest or penalties.
  You won’t be charged interest or penalties if you repay the amount due (ERC received minus 15%) by the time you return the signed closing agreement.
• No need for amended returns.
  You do not need to amend income tax returns to reduce wage expense.
• No audit.
  The IRS will not audit the ERC claimed on your employment tax return for periods resolved under this program.

Who can apply for the second VDP?

This second Voluntary Disclosure Program is not open to everyone. To be eligible for the second ERC-VDP, you must meet the following criteria:

• Processed ERC. Your ERC claimed on a 2021 employment tax return must have been processed and paid as a refund or credit, which you have cashed or deposited.
• Entitlement. You must now believe you were entitled to $0 ERC.
• No current examination or investigation. You should not be under employment tax examination or criminal investigation by the IRS. Additionally, the IRS should not have reversed or notified you of intent to reverse your ERC.
• Third-party payer. If you used a third-party payer to file your returns or claim ERC, you must apply through that payer.

If you willfully claimed fraudulent ERC or conspired in such conduct, you may not be eligible for this program.

How do you apply for the Voluntary Disclosure Program?

To apply for the second ERC-VDP, follow these steps:

1. Prepare the application package by filling out the required documents below:
   • Form 15434: Application for Employee Retention Credit Voluntary Disclosure Program.
   • ERC-VDP Form SS-10: Consent to Extend the Time to Assess Employment Taxes, included in Form 15434 (if applicable).
   • Form 433-B: Collection Information Statement for Businesses (if you are applying for an installment agreement or other collection alternative).
   • Form 2750: Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty (if applicable).
2. Submit Your Application: Use the IRS Document Upload Tool to submit your application package by 11:59 p.m. local time on November 22, 2024.
3. Pay the Amount Due: Repay the ERC amount minus the 15% reduction by the time you return the signed closing agreement to avoid interest and penalties. If you cannot pay the full amount, submit Form 433-B and request an installment agreement or other collection alternatives.

What should you expect after submitting your application to the VDP?

• IRS Review: The IRS will review your application package and verify your eligibility. You will receive a letter indicating whether your application is accepted or rejected.
• Closing Agreement: If accepted, you will receive a closing agreement. Sign and return it along with the payment to finalize the resolution.
• Account Adjustment: The IRS will adjust your account to reflect the eliminated ERC amount. Do not submit amended returns correcting your ERC.

If your application is rejected, the letter will explain why and may offer options to correct and resubmit or file an amended return.

What You Need To Know:

Eligibility Resources: Use the IRS’s Employee Retention Credit Eligibility Checklist and other IRS resources to verify your ERC eligibility.

Deadline: Ensure your application is submitted by November 22, 2024.

Third-Party Payers: Contact your third-party payer if applicable.

For assistance, consult a trusted tax professional to guide you through the process or to help with any ERC-related questions.