USTaxPenaltySaverERC Penalty Calculator
Calculate potential penalties for Employee Retention Credit (ERC) claims under IRC § 6676
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Important Notice
The IRS is actively examining ERC claims. The ERC Voluntary Disclosure Program closed November 22, 2024. If you received ERC funds you were not entitled to, you may still be able to withdraw your claim or request reasonable cause penalty relief.
Frequently Asked Questions About ERC Penalties
If you claimed the ERC and the IRS determines your claim was excessive or erroneous, you face a 20% accuracy-related penalty under IRC §6676 on the disallowed portion. For fraudulent claims, the penalty increases to 75%. The IRS has been aggressively auditing ERC claims since 2023, with over 1 million claims under review.
The IRS ERC Voluntary Disclosure Program allows employers who received ERC payments they weren't entitled to come forward and repay only 85% of the credit received (keeping 15%). This avoids the 20% accuracy penalty and potential fraud charges. The program has specific deadlines — check IRS.gov for current availability.
Yes, if your ERC claim has been filed but not yet processed or paid, you can request a withdrawal. This is the simplest option — it treats the claim as if it was never filed, so there are no penalties, interest, or repayment. Send a withdrawal request to the IRS using the fax number on your notice.
The IRS verifies two main criteria: (1) a full or partial suspension of operations due to government COVID orders, or (2) a significant decline in gross receipts (>50% decline in 2020 vs 2019, or >20% in 2021 vs 2019). Many ERC mills incorrectly applied the "supply chain disruption" argument, which the IRS has largely rejected.
You'll need to repay the full amount plus interest. If you enter the VDP, you repay 85% (no penalty). If audited, you repay 100% plus the 20% penalty plus interest from the date received. If you used an ERC promoter, you may have claims against them, but the IRS holds the employer responsible regardless.
Interest accrues from the date you received the ERC payment at the federal short-term rate plus 3%, compounded daily (currently 8% annually for Q1 2026). On a $100,000 ERC received in 2021, interest alone could be $30,000+. This is why early voluntary disclosure saves significant money.