The IRS’s second Employee Retention Credit Voluntary Disclosure Program closes November 22, 2024. If you claimed the ERC and now have concerns about your eligibility, this is your last structured opportunity to resolve the issue on favorable terms. After November 22, the IRS will shift to standard enforcement, which is significantly less forgiving. Here is how to evaluate whether disclosure makes sense for your business.
What the Voluntary Disclosure Program Offers
The program allows businesses that received ERC payments they were not entitled to repay 85% of the credit received. The IRS forgives the remaining 15%. No penalties or interest are charged on the repaid amount, and participants are not referred for criminal investigation based solely on their voluntary disclosure. This is a meaningful concession compared to what happens in a standard audit, where you would owe 100% plus penalties plus interest.
Who Should Consider It
If any of the following apply, the disclosure program deserves serious evaluation. You worked with an ERC promoter who told you “every business qualifies.” You claimed the credit based on a supply chain disruption argument without specific documentation. Your business did not actually experience the required reduction in gross receipts. You claimed the credit for quarters where your business was not subject to a full or partial suspension of operations due to a government order.
The IRS has been very clear that many claims filed through third-party promoters are ineligible. If your claim was driven by a promoter rather than a careful analysis of your specific facts, you have exposure.
What Happens If You Do Not Disclose
The IRS is processing ERC claims in batches and actively auditing suspicious filings. If the IRS denies your claim or determines you received a credit you were not entitled to, you will owe 100% repayment plus the failure-to-pay penalty (0.5% per month) plus interest at the current 7% rate. In cases of fraud, criminal prosecution is possible. The IRS Criminal Investigation division has active cases against ERC promoters and is expanding investigations to include the businesses that filed false claims.
How to Decide
The math is straightforward. If you received $200,000 in ERC payments you were not entitled to, voluntary disclosure costs you $170,000 (85%) with no penalties or interest. Waiting for an audit costs you $200,000 plus penalties that could total 50% or more, plus interest. The disclosure program is objectively the better outcome if you know your claim was problematic.
Consult with your tax advisor before the November 22 deadline. This is a decision that should be made carefully but cannot wait.