IRS Lets Taxpayers Who Wrongly Claimed Pandemic-Era Tax Credit Keep 20 Percent and No Penalty

The IRS has launched a new program that lets taxpayers pay back only 80 percent of wrongly claimed pandemic-era ERC tax credits.

A sign outside the Internal Revenue Service building is seen in Washington on May 4, 2021. Patrick Semansky/AP Photo

The Internal Revenue Service (IRS) has launched a new program for taxpayers who want to pay back money they received after filing certain pandemic-era tax credit claims in error—and to encourage participation, the IRS is letting them keep 20 percent of the funds.

The IRS said in a Dec. 21 announcement that the new “voluntary disclosure program” relates to a flood of bad claims for the pandemic-era relief program known as the Employee Retention Credit (ERC). This is a refundable tax credit designed for businesses that continued paying employees during COVID-19 shutdowns.