Nonprofit Resources
IRS Launches Process for Withdrawing Employee Retention Credit Claims
As we previously reported, on September 14, 2023, the IRS announced that it would immediately halt the processing of new ERC claims through at least December 31, 2023, to allow time to perform enhanced reviews of current claims. The IRS has been warning employers about unscrupulous third parties that charge for ERC “assistance” and then fail to properly assess an organization’s eligibility.
Organizations that filed an ERC claim but have not yet received a refund can withdraw their submission and avoid potential repayment, interest, and penalties. Organizations that have received a refund check but have not deposited or cashed it can also withdraw their claim. The IRS said that withdrawn claims “will be treated as if they were never filed.”
The IRS also noted that those “who willfully filed a fraudulent claim, or those who assisted or conspired in such conduct, should be aware that withdrawing a fraudulent claim will not exempt them from potential criminal investigation and prosecution.”
Who Can Withdraw an ERC Claim
Organizations can use the voluntary ERC claim withdrawal process if they meet all of the following requirements:
- They made the claim on an adjusted employment tax return (Forms 941-X, 943-X, 944-X, or CT-1X).
- They filed an adjusted return only to claim the ERC and made no other adjustments.
- They want to withdraw the entire amount of their ERC claim.
- The IRS has not paid the claim, or it has paid the claim, but the organization has not cashed or deposited the refund check.
The IRS said that organizations that do not meet the requirements for the withdrawal process can reduce or eliminate their ERC claim by filing an amended return.
If your organization filed an ERC claim and you are now wondering if it was accurate, we recommend reaching out to a trusted tax professional to determine whether your claim was eligible. CapinCrouse can assist you with this process.
How to Request an ERC Claim Withdrawal
The steps for requesting an ERC claim withdrawal vary, depending on whether your organization:
- Has not received a refund and has not been notified that your ERC claim is under audit
- Has not received a refund and has been notified that your ERC claim is under audit
- Has received an ERC refund check but has not cashed or deposited it yet
The IRS has outlined steps to follow in each of these situations. If your organization uses a third-party payroll company and they filed your ERC claim, consult with them before starting the withdrawal request process, as they may need to submit the request.
Next Steps
The IRS will send a letter informing you whether your withdrawal request was accepted or rejected. Note that an approved request will not be effective until you receive an acceptance letter from the IRS.
If your withdrawal is accepted, you may need to amend your income tax return as a result. The Claiming the ERC section of the IRS’s ERC FAQs has additional details.
The IRS is also working on a settlement program to help employers who claimed the ERC and have already received and cashed or deposited the refund. More information is expected later this fall.
Please contact us with questions or to learn how we can help you with the ERC. We offer a variety of ERC services designed to assist organizations in any stage of the ERC process.
