On October 19, 2023, the IRS announced a special withdrawal process to help those who filed an Employee Retention Credit (“ERC”) claim and are concerned about its accuracy. This follows the September 14 announcement of a moratorium on processing new ERC claims. The new withdrawal option allows employers that filed an ERC claim but have not yet received a refund to completely withdraw their submission and avoid possible future repayment, interest, and penalties, should their claim be denied. This option is limited in scope and cannot be used by employers who already received and cashed refund checks or who wish to amend claims already in progress rather than withdrawing them in full. Even so, employers who are worried about potential penalties may wish to use this new process.
What You Need to Know:
- The IRS announced that taxpayers may take advantage of a special process to withdraw ERC claims if they have not yet received or cashed refund checks.
- Employers must be willing to completely withdraw their claim to take advantage of the special withdrawal process – this option is not available to those wishing to amend ERC claims.
If you want to use the new withdrawal process, you must meet all of the following criteria:
- You made the claim on an adjusted employment tax return (Forms 941-X, 943-X, 944-X, CT-1X).
- You filed your adjusted return only to claim the ERC, and you made no other adjustments.
- You want to withdraw the entire amount of your ERC claim.
- The IRS has not paid your claim, or the IRS has paid your claim, but you haven’t cashed or deposited the refund check.
The process of submitting the withdrawal request varies based on each employer’s situation. The IRS has provided instructions for eligible employers falling into three categories: (i) those who haven’t received a refund and their claim is not under audit, (ii) those who haven’t received a refund and their claim is under audit, and (iii) those who received a refund check but have not cashed or deposited it.
The IRS created this withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims. For more detailed information about ERC issues, please click here.
