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The IRS Is Graciously Letting Taxpayers Withdraw Some Bad ERC Claims

Posted on by Going Concern News Desk
Washington DC, USA - June 3, 2016: Sign on corner of Internal Revenue Service Building in Washington DC showing side road construction and parked cars

On Thursday the IRS announced a special withdrawal process to help those who may have filed an Employee Retention Credit (ERC) claim and are worried they may not be entitled to it. This comes on the heels of the IRS issuing an immediate moratorium on ERC claims in September because “aggressive promoters” are why we can’t have nice things.

Employers that have filed an ERC but not yet received a refund can withdraw the claim and avoid repayment, interest, penalties, and being made fun of for falling for slick ERC charlatans flooding their inbox. Employers that submitted an ERC claim still being processed can withdraw their claim and avoid the possibility of getting a refund for which they’re ineligible, the IRS said in a news release.

The agency also said:

The IRS created the withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.

Those who willfully filed a fraudulent claim, or those who assisted or conspired in such conduct, should be aware that withdrawing a fraudulent claim will not exempt them from potential criminal investigation and prosecution.

“The IRS is committed to helping small businesses and others caught up in this onslaught of Employee Retention Credit marketing,” said IRS Commissioner Danny Werfel. “The aggressive marketing of these schemes has harmed well-meaning businesses and organizations, and some are having second thoughts about their claims. We want to give these taxpayers a way out. The withdrawal option allows employers with pending claims to avoid future problems, and we encourage them to closely review the withdrawal option and the requirements. We continue to urge taxpayers to consult with a trusted tax professional rather than a marketing company about this complex tax credit.”

Employers can use the ERC claim withdrawal process if all of the following apply:

  • They made the claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X).
  • They filed the adjusted return only to claim the ERC, and they made no other adjustments.
  • They want to withdraw the entire amount of their ERC claim.
  • The IRS has not paid their claim, or the IRS has paid the claim, but they haven’t cashed or deposited the refund check.
  • Taxpayers who are not eligible to use the withdrawal process can reduce or eliminate their ERC claim by filing an amended return.

How to withdraw an ERC claim

To take advantage of the claim withdrawal procedure, taxpayers should carefully follow the special instructions at IRS.gov/withdrawmyerc, summarized below.

  • Taxpayers whose professional payroll company filed their ERC claim should consult with the payroll company. The payroll company may need to submit the withdrawal request for the taxpayer, depending on whether the taxpayer’s ERC claim was filed individually or batched with others.
  • Taxpayers who filed their ERC claims themselves, haven’t received, cashed or deposited a refund check and have not been notified their claim is under audit should fax withdrawal requests to the IRS using computer or mobile device. The IRS has set up a special fax line to receive withdrawal requests. This enables the agency to stop processing before the refund is approved. Taxpayers who are unable to fax their withdrawal using a computer or mobile device can mail their request, but this will take longer for the IRS to receive.
  • Employers who have been notified they are under audit can send the withdrawal request to the assigned examiner or respond to the audit notice if no examiner has been assigned.

Those who received a refund check, but haven’t cashed or deposited it, can still withdraw their claim. They should mail the voided check with their withdrawal request using the instructions at IRS.gov/withdrawmyerc.

The IRS will be issuing more guidance for employers later this fall.

For professionals reading this interested in the ERC withdrawal process you can sign up the upcoming November 2 IRS webinar “Employee Retention Credit: Latest information on the Moratorium and Options for Withdrawing or Correcting Previously Filed Claims.”

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