The ERC voluntary disclosure program gave taxpayers a structured path to return Employee Retention Credits they received in error for tax years 2020 and 2021. The IRS announced this program on December 21, 2023, offering favorable repayment terms that included a 20% discount on the total amount owed and no interest charges on the repaid portion. For businesses that filed ERC claims based on bad advice or misunderstood eligibility rules, the program represented the clearest route to resolving potential compliance issues before the IRS took enforcement action. The first program has since closed, and a follow-up program with different terms closed in November 2024, so the details below explain how the program worked and what options remain.
This article answers one central question: if your business received Employee Retention Credit refunds it was not entitled to, how do you repay them on the best available terms and limit your exposure to penalties? The sections below cover what the program offers, who qualifies, how to file, and how the voluntary disclosure path differs from the separate ERC withdrawal process. If you want a professional to evaluate your specific situation, our tax advisory services team handles ERC remediation directly.
What the ERC voluntary disclosure program offers
The IRS designed the ERC voluntary disclosure program to encourage taxpayers to come forward voluntarily rather than wait for an audit or enforcement notice. Under this program, taxpayers only need to repay 80% of the ERC refunds they received. The remaining 20%, along with any interest the IRS paid on the original refund, stays with the taxpayer.
This 20% reduction is significant. For a business that received a $100,000 ERC refund, participation in the voluntary disclosure program means repaying just $80,000, a $20,000 savings compared to full repayment. The IRS will also not charge interest on the 80% repayment amount, which removes another layer of financial burden that would apply under standard repayment procedures. The IRS describes these terms in its official guidance on the Employee Retention Credit Voluntary Disclosure Program.
For taxpayers who cannot afford to pay the full 80% at once, the IRS allows participants to apply for an installment agreement. However, the standard interest rates and fees associated with IRS installment agreements still apply to any balance carried under a payment plan. This means the interest-free benefit only extends to taxpayers who can pay the required amount in full upon entering the program.
Who qualifies for the ERC voluntary disclosure program
Eligibility for the employee retention credit voluntary disclosure program comes with several important conditions. Not every taxpayer who claimed the ERC can participate, and the IRS has set clear boundaries around who may apply.
To qualify, taxpayers must meet all of the following requirements. They must not be under criminal investigation by the IRS or any federal law enforcement agency. They must not currently be under an IRS employment tax examination. They must not have already received an IRS notice and demand for repayment of their ERC claims. Meeting all three conditions is mandatory, and failing even one disqualifies a taxpayer from the program.
There is also a disclosure requirement that some taxpayers may find uncomfortable but is non-negotiable. Participants must provide the IRS with the names, addresses, and telephone numbers of any advisers or tax preparers who assisted with or advised on the original ERC claims. The IRS has been aggressive in pursuing what it calls “ERC mills,” promoters who marketed the credit to businesses that did not actually qualify, and this information requirement serves that enforcement goal.
How to apply using Form 15434
Taxpayers who wish to participate in the ERC voluntary disclosure program must file IRS Form 15434, titled “Application for Employee Retention Credit Voluntary Disclosure Program.” This form serves as the official application and must be submitted to the IRS by the program deadline.
The first ERC voluntary disclosure program ran from December 21, 2023, through March 22, 2024, and applied to ERC refunds received for both the 2020 and 2021 tax periods at the 80% repayment rate. The IRS later opened a second voluntary disclosure program that ran from August 15, 2024, through November 22, 2024. That second program applied only to ERC received for 2021 tax periods and required participants to repay 85% of the credit rather than 80%. Both voluntary disclosure windows are now closed.
Because no voluntary disclosure program is currently open, taxpayers who still need to resolve incorrect ERC claims should confirm available options with their tax adviser. The IRS has reopened voluntary disclosure terms once already, so a future window is possible, but it is not guaranteed. Acting promptly matters because the IRS may initiate its own examination at any time, and once a notice or audit begins, the taxpayer loses eligibility for any voluntary disclosure terms.
Form 15434 requires detailed information about the ERC claims filed, the amounts received, and the tax periods involved. Taxpayers should gather all relevant documentation, including original ERC claims, amended returns, and correspondence with any ERC promoters, before beginning the application.
The ERC withdrawal process for pending claims
The IRS also created a separate ERC withdrawal process for taxpayers whose refund claims have not yet been processed or paid. This option is distinct from the voluntary disclosure program and serves a different purpose.
Under the withdrawal process, taxpayers can ask the IRS to treat their pending ERC claim as if it were never filed. The IRS will not impose any penalties or interest on withdrawn claims. This is effectively a clean slate: the claim disappears from the IRS system, and the taxpayer faces no consequences for having submitted it. The agency outlines eligibility and steps in its ERC claim withdrawal guidance.
The withdrawal option is particularly valuable for businesses that filed ERC claims based on aggressive marketing from promoters but have not yet received any refund money. Rather than waiting for the IRS to deny the claim, which could trigger penalties, withdrawing the claim proactively eliminates the risk entirely.
The distinction matters: the ERC voluntary disclosure program applies to taxpayers who already received their refund and need to pay money back, while the ERC withdrawal process applies to taxpayers whose claims are still pending and who want to cancel them before any money changes hands. Businesses that maintain disciplined records and reconcile payroll filings against their general ledger are better positioned to document which quarters fall into which category. Our client accounting services help businesses keep those records audit-ready year round.
Why businesses should act on ERC compliance now
The IRS has signaled repeatedly that it intends to increase enforcement around ERC claims. On September 14, 2023, the agency announced a moratorium on processing new ERC claims while it reviewed the backlog of existing applications, and it has continued to apply heightened scrutiny to claims since then. The agency has also pursued thousands of audits targeting ERC claims it considers suspicious.
For businesses that claimed the employee retention credit based on questionable advice, the voluntary disclosure program offers substantially better terms than what the IRS would impose through an audit or enforcement action. In a standard audit scenario, a taxpayer found to have improperly claimed the ERC would need to repay 100% of the credit plus interest and potentially face accuracy-related penalties of 20% or more.
Waiting carries real risk. Once the IRS initiates an examination or sends a demand letter, the voluntary disclosure option closes permanently for that taxpayer. Acting proactively not only saves money through the 20% discount but also demonstrates good faith, which can influence how the IRS handles any related issues.
Choosing between voluntary disclosure and withdrawal
Deciding between the ERC voluntary disclosure program and the ERC withdrawal process depends entirely on whether the taxpayer has already received the refund. Taxpayers who received ERC refund payments must use the voluntary disclosure path if they want to resolve the matter on favorable terms. Taxpayers with pending, unprocessed claims should use the withdrawal process instead.
In some cases, a business may have filed ERC claims across multiple quarters, with some refunds already paid and others still pending. These taxpayers may need to use both programs simultaneously: voluntary disclosure for the quarters where money was received, and withdrawal for the quarters where claims are still in the pipeline.
Tax advisers can help evaluate which path applies to each quarter and ensure that all required forms and disclosures are filed correctly. Given the complexity of ERC eligibility rules and the IRS’s evolving enforcement posture, professional guidance is strongly recommended before entering either program.
Frequently Asked Questions
What is the ERC voluntary disclosure program?
The ERC voluntary disclosure program is an IRS initiative that allows taxpayers to repay Employee Retention Credits they claimed in error for 2020 and 2021. Participants repay only 80% of the refund received, keep the remaining 20% and any IRS-paid interest, and face no additional interest charges on the repayment.
Who is eligible for the ERC voluntary disclosure program?
Taxpayers qualify if they are not under criminal investigation, not currently under an IRS employment tax examination, and have not already received an IRS notice demanding ERC repayment. All three conditions must be met to participate.
What is Form 15434 and when is it due?
Form 15434 is the official IRS application for the Employee Retention Credit Voluntary Disclosure Program. The first program closed on March 22, 2024, and a second program closed on November 22, 2024, so no voluntary disclosure window is currently open. Taxpayers should check with their tax adviser for any new programs, as the IRS has reopened similar terms in the past.
What is the difference between ERC voluntary disclosure and ERC withdrawal?
The voluntary disclosure program is for taxpayers who already received ERC refund money and need to pay it back on favorable terms. The ERC withdrawal process is for taxpayers whose claims are still pending and who want to cancel them before receiving any funds. Withdrawn claims are treated as if they were never filed.
Do I have to name my ERC preparer to the IRS?
Yes. The voluntary disclosure program requires participants to provide the names, addresses, and phone numbers of any advisers or tax preparers who helped with the original ERC claims. This requirement is mandatory and cannot be waived.
Can I set up a payment plan for ERC repayment?
Taxpayers who cannot pay the full 80% repayment at once may apply for an IRS installment agreement. However, standard installment agreement interest rates and fees will apply to any remaining balance, unlike the interest-free terms available for lump-sum repayment through the program.
