In September, the Internal Revenue Service (IRS) announced an immediate moratorium through at least the end of the year on processing new Employee Retention Credit (ERC) claims, due to rising concerns over inaccurate and fraudulent claims. The moratorium was put in place to allow the IRS to put more compliance checks in place for reviewing and accepting new ERC claims. Recently, the IRS has released a withdrawal process for ERC claims for employers who have a claim in process.
Who Qualifies to Withdraw an ERC Claim?
Taxpayers seeking to withdraw an ERC claim must do so in its entirety, as partial withdrawals are not permitted. When a taxpayer withdraws their claim, the IRS will treat it as if the taxpayer never submitted a claim, thereby avoiding the application of civil penalties and interest. Importantly, taxpayers who have reconsidered filing their claim will not face any future obligations for repayment, interest or penalties.
To qualify for the IRS ERC withdrawal, all of the following must apply:
- The employer made the claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X).
- The employer adjusted the return only to claim the ERC and made no other adjustments.
- The employer wants to withdraw the entire amount of their ERC claim.
- The IRS has not paid for their claim, or the IRS has paid the claim, but the employer has not cashed or deposited the refund.
Taxpayers who do not qualify for the withdrawal process can reduce or eliminate their ERC claim by filing an amended return.
How Does the Withdrawal Process Work?
A qualified taxpayer can take advantage of the withdrawal process, by following the specific instructions that best fits their scenario.
- Taxpayers whose professional company filed their ERC claim – The taxpayer should consult with their payroll company who 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 have filed their own ERC claims, have not received, cashed or deposited a refund check and have not been notified their claim is under audit – The taxpayer should fax a withdrawal request to the IRS using a computer or mobile device. The IRS has a special fax line in place to receive this request, which enables the agency to stop processing before the refund is approved. If a taxpayer is unable to fax their request, they can mail their request to the IRS however, this will take longer.
- Employers who have been notified they are under audit – Employers can send the withdrawal request to the assigned examiner or respond to the audit notice if no examiner has been assigned.
Taxpayers can still withdraw their claim if they have received a refund check but have not cashed or deposited it. They can mail a voided check with their withdrawal request using the instructions at IRS.gov/withdrawmyerc.
Additional Guidance During the Moratorium
Through the period of the moratorium, taxpayers are encouraged to reach out to a trusted tax professional who understands the complexities of qualifying for the ERC if they are unsure of an existing claim. It is important that employers be wary of any aggressive marketing about ERC claims, such as agreeing to costly up-front loans in anticipations of refund. The IRS website has resources on frequently asked questions about ERC and a 2023-2024 fact sheet that has more details about the ERC withdrawal process.
If you have any questions regarding ERC, please contact your BSSF advisor.