Your business: “Let’s just forget we ever filed that ERC claim, shall we?”
IRS: “ERC claim? What ERC Claim?”

The IRS has announced a formal withdrawal process for companies that may have incorrectly claimed Employee Retention Credits.

The announcement comes after numerous reports of fraudulent or ill-advised ERC claims being filed by companies working with aggressive third-party promoters.

The new withdrawal process allows companies who believe they may have an invalid ERC claim to proactively withdraw it and avoid penalties. According to the IRS announcement, “Claims that are withdrawn will be treated as if they were never filed.”

IRS Offers a Way Out

The IRS created the withdrawal program to assist taxpayers who may have been misled by ERC marketers who pushed them into filing an erroneous claim. The program comes after the IRS saw a surge of ineligible returns filed in recent months.

“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, in a statement announcing the program. “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.”

That Time the IRS Said “Stop, Wait a Minute”

The new withdrawal program comes on the heels of the IRS’s September 14 announcement instituting a moratorium on new ERC claims through year end.

Meanwhile, claims submitted before the September 14 cutoff will take longer to process, an estimated 180 days, and will face stricter compliance reviews.

The moratorium not only gives the IRS an opportunity to review returns more closely, but also it’s a chance for taxpayers to withdraw questionable claims before the IRS takes further action. The agency says it has hundreds of criminal cases underway, and thousands of ERC claims have been referred for audit.

Who Can Withdraw an ERC Claim

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.

If you are unsure of your eligibility, consult a tax expert to review your return.

How to Withdraw an ERC Claim

Businesses looking to withdraw an ERC claim should follow the IRS’s guidance closely to ensure their request is processed promptly. Detailed instructions are available at IRS.gov/WithdrawMyERC

In summary:

• If you filed with a payroll provider, consult the payroll company on how to proceed. Depending on how your request was submitted, they may need to initiate the withdrawal request.
• If you filed independently and haven’t received a refund or been notified of an audit, you can submit your request electronically using the IRS’s special e-fax line: 855-738-7609. Submit a copy of the return that was filed and write “withdrawn” in the left hand Sign it, date it, and include your title.
• If you received a refund but have not deposited the check, mark it void and mail it back to the IRS with your withdrawal request.
• If you’ve already received an IRS audit letter, you may still be able to withdraw your return. Notify your examiner or contact the Law Offices of Alyssa Maloof Whatley. We can evaluate your eligibility, help you withdraw your claim, or represent you in the audit.

Be aware that if you deposit a refund that is later found to be in error, you may find yourself in tax trouble — owing repayments, penalties, and interest — even if an ERC promoter was involved. The IRS has signaled that a settlement relief program is also coming this fall.

Talk to a qualified ERC audit attorney about your situation now. 

IRS Warns of Evolving Scam

With questionable promoters still actively pushing bad ERC claims, the IRS urges employers to use extreme caution when pursuing these credits. According to the IRS, some promoters have changed their tactics and are now pushing employers to take out a costly up-front loan in anticipation of a refund.

Taxpayers should be wary of aggressive sales tactics around the ERC and are advised to consult with a licensed tax professional, not a pop-up ERC promoter.

An Experienced ERC Audit Attorney Can Help

We understand that ERC claims can feel overwhelming. You don’t want to miss out on tax credits you’re rightfully entitled to, but you may have been misled.

Reach out and get the clarity you need. We’re ready to help you receive all entitled relief under the law and avoid potential penalties.