In the last Bottom Line newsletter, we explained the effective hold by the Internal Revenue Service (IRS) on processing new ERC claims until the end of the 2023 year. Recently, the IRS announced details of a special withdrawal process made to help those who filed a claim and are concerned about its accuracy. This development aims to simplify the ERC withdrawal procedure for employers.
This new withdrawal option allows certain employers that filed an ERC claim, but have not yet received a refund, to withdraw their submission and avoid future repayment, interest and penalties. The IRS created the withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.
The IRS has noted that those who willfully filed a fraudulent claim, or those who assisted or conspired in such conduct, will not be exempted from potential criminal investigation and prosecution.
Who can ask to 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.
Taxpayers who are not eligible to use the withdrawal process can reduce or eliminate their ERC claim by filing an amended return.
How to withdraw an ERC claim
To take advantage of the claim withdrawal procedure, taxpayers should carefully follow the special instructions at IRS.gov/withdrawmyerc, summarized below.
- Taxpayers whose professional payroll company filed their ERC claim should consult with the payroll company. The payroll company may need to submit the withdrawal request for the taxpayer, depending on whether the taxpayer’s ERC claim was filed individually or batched with others.
- Taxpayers who filed their ERC claims themselves, haven’t received, cashed or deposited a refund check and have not been notified their claim is under audit, should fax withdrawal requests to the IRS. The IRS has set up a special fax line to receive withdrawal requests. This enables the agency to stop processing before the refund is approved. Taxpayers who are unable to fax their withdrawal using a computer or mobile device can mail their request, but this will take longer for the IRS to receive.
Those who received a refund check, but haven’t cashed or deposited it, can still withdraw their claim. They should mail the un-cashed check with their withdrawal request using the instructions at IRS.gov/withdrawmyerc.
It is important to act promptly if you intend to take advantage of this new ERC withdrawal process. Accurate and timely submissions are essential to ensure compliance with IRS guidelines and regulations. If you plan to use the withdrawal option, please reach out to your LMC professional with any questions.