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How to Withdraw an Employee Retention Credit (ERC) Claim

Posted by Murry Guy, CPA on Oct 24, 2023 7:48:42 AM

Employee Retention Tax Credit -1347305570-1Machen McChesney would like to bring to your attention a recent announcement from the Internal Revenue Service (IRS) regarding the Employee Retention Credit (ERC) and a special withdrawal process introduced to address concerns about ineligible claims and protect small businesses from scams. This announcement is part of a broader effort by the IRS to safeguard small businesses and organizations from the barrage of suspect ERC advertising. This announcement could be helpful if you or someone you know might be affected by improper filing ERC via suspicious 3rd parties.

Key Points of the IRS Announcement:

1. Special Withdrawal Option: The IRS has introduced a withdrawal process that allows certain employers who have filed an ERC claim but have not received a refund to withdraw their submission. This withdrawal helps them avoid potential future repayment, interest, and penalties.

2. Protecting Those Pressured or Misled: This withdrawal option is designed to assist small business owners and others who may have been pressured or misled by ERC marketers into filing claims that are ineligible. Claims that are withdrawn will be treated as if they were never filed, and the IRS will not impose penalties or interest in such cases.

The ERC Background:

The Employee Retention Credit, also known as the Employee Retention Tax Credit or ERTC, is a refundable tax credit intended for businesses that continued to pay employees during the COVID-19 pandemic when their operations were fully or partially suspended due to government orders or if they experienced a significant decline in gross receipts.

The ERC is a complex credit with specific requirements, and the IRS has received approximately 3.6 million claims since mid-September. In response, the IRS has intensified its audit efforts and is reviewing claims for compliance concerns. This includes criminal investigations for promoters and businesses involved in dubious claims.

Withdrawal Process and Guidance:

The new withdrawal process is applicable to employers who meet ALL of the specific criteria. These criteria include: 

  • They made the ERC claim on a 941-X return, 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.

The withdrawal process is also outlined on the IRS website at IRS is also working on guidance for employers who were misled into claiming the ERC and have already received the payment. More details on this will be available in the fall.

Beware of New Scammer Tactics:

Be aware that scammers have evolved their tactics following the recent moratorium announcement. A new strategy for some scammers is to attempt to push employers into agreeing to costly up-front loans in anticipation of an ERC refund. We strongly advise you to avoid such loans and remain vigilant against ERC scams.

For more information on the above article or any business advisory services, contact Murry Guy, CPA, by calling (334) 887-7022 or leaving us a message below.

Topics: Business Advisory

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