IRS Urges Employers to Participate in ERC Voluntary Disclosure Program
Businesses have another chance to fix ERC claims at a lower cost, but only for a limited time.


Thousands of businesses looking to revise ERC claims at a discount will now get a second chance, as the IRS recently announced the reopening of its Voluntary Disclosure Program (VDP).
The program, designed to help businesses fix incorrect Employee Retention Credit (ERC) claims without penalties or interest, will run for a limited time through Nov. 22. This second VDP will offer a 15% discount for businesses repaying credits for tax periods in 2021, slightly down from the first voluntary ERC disclosure program’s 20% that ended in March.
During the first VDP, more than 2,600 applications from ERC recipients disclosed $1.09 billion in erroneous credits. This second run could recapture more than $1 billion.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The ERC is a refundable tax credit made available to certain employers who paid employees during COVID-related business shutdowns. As previously reported by Kiplinger, some abusive promotors improperly advertised the ability to claim the ERC to unsuspecting businesses which led to a surplus of errors and ERC fraud.
Here’s what you need to know about the second round of the IRS ERC Voluntary Disclosure Program.
IRS bolsters ERC compliance efforts
The IRS is doubling down on its ERC compliance measures. This time, by delivering up to 30,000 letters aimed at recapturing potentially over $1 billion worth of credits.
Several thousand letters have already been mailed, the IRS noted, with more due to hit mailboxes in the upcoming weeks and into the fall.
Before you check your mailbox, you should know:
- Letters will be delivered to taxpayers who issued claims for the 2021 tax year and some later-filed claims for the 2020 tax year.
- Businesses that receive recapture letters will be ineligible to participate in the ERC VDP for the calendar quarter the letter covers.
According to the IRS, the letters delivered in this round will involve larger claims than those mailed out earlier this spring. That’s because this round will focus on ERC claims filed in 2021. At the time, Congress had increased the maximum ERC from $5,000 per employee per year in 2020 to $7,000 per employee each quarter of the year in 2021.
“This new round of letters serves as another incentive for businesses that believe they received an erroneous Employee Retention Credit payment to come forward and participate in the disclosure program and resolve the matter on more favorable terms," IRS Commissioner Danny Werfel said in a release.
Separately, the IRS has taken additional steps to move forward with ERC, including:
- Sending 28,000 disallowance letters to businesses whose pending claims showed a high risk of being incorrect. These errors could prevent up to $5 billion in improper payments.
- Identifying 50,000 valid ERC claims being moved down the pipeline for payment processing in upcoming weeks. For more information, see Kiplinger's report: IRS Restarts Some ERC Claims Processing.
Bottom line: Businesses should ‘act now’
As Kiplinger reported, the IRS finally lifted its moratorium on ERC claims processing this summer. However, the agency also cautioned that processing ERC claims could take time due to their complexity. Taxpayers were also told not to call the IRS toll-free lines for ERC-related questions, as information was not generally available as processing work continued.
However, the IRS is asking some employers to take action now.
Businesses with pending, unprocessed ERC claims are being asked to consider a separate ERC Claim Withdrawal Program. The program allows employers to withdraw a pending ERC claim with no interest or penalties.
To date, the program has resulted in more than 7,300 entities withdrawing up to $677 million in claims.
Why is the Voluntary Disclosure Program important?
As mentioned, the VDP offers a key break for employers to self-correct errors linked to ERC claims and repay credits they may have received at a discount.
But keep in mind that the program is temporary. That's why the IRS is urging businesses to “act soon” and participate so taxpayers can prevent potential issues such as audits, penalties, full repayment, and incurring more interest.
If you are in doubt, or suspect that you may have filed an incorrect ERC claim, you should talk with a trusted tax professional and see if this program could be a chance to correct the error at a lower cost.
Related Content
- Audit Finds IRS Employees Owe $50 Million in Taxes
- What’s Happening With the Employee Retention Tax Credit?
- IRS Restarts Processing of Some ERC Refunds: What to Know
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Gabriella Cruz-Martínez is a finance journalist with 8 years of experience covering consumer debt, economic policy, and tax.
Gabriella’s work has also appeared in Yahoo Finance, Money Magazine, The Hyde Park Herald, and the Journal Gazette & Times-Courier.
As a reporter and journalist, she enjoys writing stories that empower people from diverse backgrounds about their finances, no matter their stage in life.
-
Trade Uncertainty Sparks Whipsaw Session: Stock Market Today
Volatility is making a cameo here in mid-October, a generally positive month marked by its historic stock market events.
-
How to Add Your Passport to Google Wallet
Travelers can now store and use their digital passport on Android for faster, more secure airport experiences.
-
IRS Updates 2026 Tax Deduction for People Age 65 and Older
Tax Changes Adjustments to the extra standard deduction can impact the tax bills of millions of older adults. Here are some new amounts to know for 2026.
-
Child Tax Credit, EITC, & More: Three IRS Tax Breaks Getting Bigger Soon
Tax Credits Key family tax breaks are higher for 2026, including the Earned Income Tax Credit and the Adoption Credit. Here's what they're worth.
-
Standard Deduction 2026 Amounts Are Here
Tax Breaks What is the standard deduction for your filing status in 2026?
-
Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025
Tax Tips If you’re retired and filing taxes, these five tax credits and deductions could provide thousands in relief (if you qualify).
-
IRS Names Its First CEO: But He’s Also Still Running Social Security
Tax News Will this new role make it difficult to address emerging issues like budget and staffing cuts and customer service concerns?
-
New Tax Rules: Income the IRS Won’t Touch in 2025
Income Taxes From financial gifts to Roth withdrawal rules, here’s what income stays tax-free under the new Trump 2025 tax bill, and some information on what’s changed.
-
Three Popular Tax Breaks Are Gone for Good in 2026
Tax Breaks Here's a list of federal tax deductions and credits that you can't claim in the 2026 tax year. High-income earners could also get hit by a 'surprise' tax bill.
-
Tax Brackets 2025 Quiz: How Much Do You Know?
Quiz Test your knowledge of IRS rules that impact how much money you keep in your wallet.