IRS Offers Withdrawal Option for Dubious ERC Claims
Despite multiple warnings, many business owners have been misled into filing ineligible Employee Retention Credit (ERC) claims. To safeguard small businesses, the IRS has introduced a special withdrawal process for those concerned about the accuracy of their ERC claim.
The ERC, designed to support businesses that continued paying employees during the pandemic, has specific eligibility criteria. Since mid-September, the IRS has received around 3.6 million claims for this credit.
In July, the IRS announced a shift towards reviewing ERC claims for compliance concerns, with an emphasis on auditing and investigating dubious claims. This was followed by a September 14th announcement of a moratorium on processing new claims, while existing claims face stricter compliance reviews.
On October 19, the IRS released guidance outlining a procedure for withdrawing a claim. Employers can use this process if their claim meets specific criteria. This includes filing the claim on an adjusted employment return solely for the ERC, and wanting to withdraw the entire claim amount. The IRS must not have paid the claim, or if they have, the employer should not have cashed or deposited the refund check.
For detailed instructions on the claim withdrawal procedure, visit IRS.gov/withdrawmyERC. Taxpayers should follow these steps carefully.
Employers who had their ERC claim filed by a professional payroll company should consult with them regarding the withdrawal process. Depending on how the claim was filed, the payroll company may need to submit the request.
Taxpayers who filed their ERC claims individually, haven’t received the refund check, and haven’t been notified of an audit, can fax their withdrawal request to the IRS using a computer or mobile device. The IRS has set up a dedicated fax line for this purpose. Mailing the request is also an option, but it will take longer for the IRS to receive it.
Employers under audit should send the withdrawal request to their assigned examiner or respond to the audit notice if no examiner has been assigned.
For those who received a refund check but haven’t cashed it, they can still withdraw their claim. They should follow the instructions at IRS.gov/withdrawmyERC.
If you suspect you’ve been misled by an ERC promoter or marketer, and need help determining the validity of your claim, please contact our office for assistance.