On Oct. 19, 2023, the Internal Revenue Service (IRS) announced a withdrawal process for Employee Retention Credit (ERC) claims in what the IRS described as being “part of the larger effort to protect small businesses and organization from scams” if they are “concerned about [claim] accuracy.” The withdrawal option is available to those who already filed an ERC claim but have yet to receive their credit refund, or to those who submitted an ERC claim that is currently still being processed by the IRS.
The withdrawal process was announced about one month after the IRS issued a moratorium on processing further ERC claims that had been submitted. As of September 2023, the IRS says it has received 3.6 million claims for the credit since the ERC’s creation in 2020.
Who is eligible for a withdrawal on their ERC claim?
Employers must meet all the following criteria to be able to use the withdrawal process for their ERC claim:
- The ERC claim was made on an adjusted employment tax return (e.g., Form 941X).
- The return was filed only to claim the ERC with no other adjustments included.
- The employer must withdraw the full amount of the ERC credit.
- The ERC claim has not yet been paid, or if it has been paid, the employer as not cashed the ERC refund check.
If an employer does not meet all the above criteria, an amended return must be filed to adjust their ERC claim.
How can I withdraw my ERC claim?
Employers can withdraw their ERC claim by making a copy of their Form 941 and write “Withdrawn” in the left margin before printing and signing with their authorized name and date in the right margin. The form must then be faxed to the IRS (855-738-7609). If an employer has been selected for an ERC audit, the withdrawal should be sent directly to the identified IRS Agent or to the mailing address per the audit notice. Also, any uncashed ERC refund checks should be voided and mailed with the withdrawal request to the IRS. Further details can be found on the IRS’s website.
Who should consider a withdrawal to their ERC claim?
Any employers who are aware of any errors with their ERC filing should consider withdrawing their claim. Also, any employers who filed their ERC claim prior to any IRS guidance being provided regarding partial shutdown mandates, specifically supply chain eligibility, should weigh their options for considering an ERC withdrawal. Additionally, employers who have concern they were the victim of ERC promoters or aggressive marketing can consider withdrawing their claim as an option. In all scenarios, a second look risk assessment at your ERC claim can help you make an informed decision with your tax advisor if withdrawing your claim is the best option for your ERC situation.
Windham Brannon understands the ERC
Windham Brannon’s Tax Controversy Practice understands the ERC and can help determine ERC eligibility as well as if an ERC withdrawal is the right option for your tax situation. Our professionals are qualified, trusted tax professionals, helping to provide you with critical professional advice on the ERC. For more information, contact your advisor today, or reach out to Tomika Bullet.
