IRS Introduces New Withdrawal Process for Employee Retention Credit (ERC) Claims

Posted by Rick Miller | Oct 30, 2023 | 0 Comments

The Internal Revenue Service (IRS) has initiated a withdrawal option for small businesses and organizations concerned about the accuracy of their Employee Retention Credit (ERC) claims. This measure comes as part of the agency's broader initiative to shield these entities from potential scams.

It is essential that claims for Employee Retention Credits be made by business owners with complete understanding of the eligibility requirements as well as the consequences for improper, erroneous or fraudulent claims.

Taxpayers who question their claim may contact Frazier Law at (615) 267-0125 or (989) 704-6560 for an independent ERC review.

Key Features of the Withdrawal Process:

  1. Employers who have submitted an ERC claim but have not received a refund can opt to withdraw to bypass future repayment, interest, and penalties.

  2. The withdrawal process assists businesses that were misled into filing ineligible ERC claims by overzealous promoters. Claims retracted will be considered as unfiled, and no penalties or interest will be levied by the IRS.

  3. It's important to note that if someone deliberately filed a fraudulent claim or was part of such activities, the withdrawal won't shield them from potential criminal consequences.

IRS Commissioner Danny Werfel emphasized the agency's commitment to supporting small businesses that were influenced by aggressive ERC marketing schemes. Werfel encouraged employers with pending claims to consider this withdrawal option.

About the Employee Retention Credit (ERC):

The ERC, or Employee Retention Tax Credit, is a refundable tax credit for businesses that kept employees on their payroll during specific periods of the COVID-19 pandemic. It is aimed at companies affected by government-mandated operational suspensions or substantial revenue drops. The credit is not available for individual taxpayers.

Since its inception, approximately 3.6 million claims have been filed for the ERC. The IRS is intensifying its audit efforts on dubious claims and has numerous ongoing criminal investigations related to the credit.

Recent Developments:

A recent halt on processing new ERC claims was announced on September 14, mainly due to the surge of ineligible claims. This pause will extend until the end of the year. Claims made prior to this date will continue to be processed, albeit at a reduced speed owing to comprehensive compliance checks.

Guidelines on Withdrawing an ERC Claim:

To qualify for the withdrawal process, employers should meet the following criteria:

  • Claims were made using specific adjusted employment returns.
  • The adjusted return was solely for the ERC without any other modifications.
  • They intend to retract the entire amount of the ERC claim.
  • The IRS has either not paid the claim or, if paid, the refund check hasn't been cashed or deposited by the employer.

Details on the withdrawal process can be found on the IRS website. The IRS also offers resources, including an upcoming webinar and an interactive eligibility checker for the ERC.

Beware of Scams:

The IRS has noted new tactics from scammers post the September 14 moratorium announcement. There have been cases of promoters persuading businesses into availing expensive upfront loans expecting a refund. The IRS urges taxpayers to be vigilant and be aware of the signs of ERC-related scams. The IRS continues to advocate for employers to consult trusted tax professionals and be cautious about promoters looking to exploit them.

About the Author

Rick Miller

Tax Matters - Advisory Team Lead


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