The IRS urges business owners who filed claims for an Employee Retention Credit (ERC) to revisit their eligibility and promptly withdraw any unqualified applications. The IRS recently published guidance outlining the process for withdrawing such claims.
Back in September 2023, the IRS placed a moratorium on the processing of new ERC claims due to the influx of what they believe to be ineligible claims. Since then, claims filed before the moratorium have been subject to additional scrutiny, and, in some cases, the IRS is reaching out to employers for additional documentation to support the claim’s legitimacy. The moratorium is expected to last until at least the end of 2023.
How to Withdraw a Claim
Employers are eligible to use the new withdrawal process if all the following apply:
- the claim was made on an adjusted employment tax return (941-X, 943-X, 944-X, CT-1X),
- they filed the adjusted tax return only to claim the ERC and made no other changes,
- they want to withdraw the entire amount of the ERC claim and
- the IRS has not yet paid the claim, or, if it was paid, the employer has not yet cashed the refund check.
The actual withdrawal process depends on many factors, such as:
- whether the employer has been notified that their claim is under audit,
- whether the refund check was received and cashed,
- whether a payroll company was used to file the claim. If so, the payroll company may need to submit the withdrawal request.
The full withdrawal process can be found at https://IRS.gov/withdrawmyerc.The IRS is still working on a withdrawal process for employers that have already cashed their refund checks.
While qualifying ERC claims can be withdrawn, the IRS has indicated that withdrawing a claim does not protect those who willingly filed a fraudulent claim from possible criminal investigation and prosecution.
The IRS is giving an important opportunity to business owners who may have been given incorrect guidance on whether they were eligible for the ERC. It is imperative that those who may be affected act as soon as possible to withdraw claims that they now believe to have been filed in error. If you have any questions, please don’t hesitate to contact your WG advisor.