​What to Do If Your Business Needs to Withdraw an ERC Claim

At this point, the story of the Employee Retention Credit could be a Netflix documentary.

We mentioned previously about scammers claiming businesses are eligible for the ERC when they’re not.

Back in September, the IRS even stopped processing ERC claims because of the “tsunami” of false ones. The agency’s also taken to calling the scammers “ERC mills,” which does not sound good.

Recently, the tax agency released a process for taxpayers who want to withdraw an ERC claim they previously filed. It’s the IRS’s attempt to help those who ERC mills misled so they don’t get stuck paying penalties and interest on money they’re not entitled to. And just last week, the agency sent out 20,000 disallowance letters that specifically targeted fraudulent entities and entities with no paid employees.

Employers who can withdraw include:

• Those who claimed the ERC on an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X).
• Those who filed the adjusted return only to claim the ERC but made no other adjustments.
• Those who want to withdraw the entire amount of their ERC claim.
• Those whose claim has not yet been paid or employers who have not cashed or deposited the refund check.

Employers who aren’t eligible to use the withdrawal process might be able to reduce or eliminate their ERC claim by filing an amended return.

The withdrawal process depends on whether an employer was notified that they’re under audit or if a payroll service provider submitted the claim on their behalf.

Not under audit and no refund received — Those employers can fax a withdrawal request to the IRS using a special fax line at 855-738-7609. The agency’s also taking mailed requests, but processing might take longer.

The IRS has instructions on what the adjusted return should look like — as well as an example — on its website.

Not under audit, refund received, but not cashed or deposited — Those employers can follow the same instructions as above. But they also need to mail the check and the copy of the amended return to the IRS at the mailing address provided at IRS.gov/withdrawmyerc. Section C of the site lists the other steps employers should take.

Under audit — Those employers have to submit a withdrawal request to the assigned examiner or to the audit notice if there’s no examiner assigned.

Submitted by a payroll service provider — Those employers should contact the payroll company to determine if the provider will submit the withdrawal request on their behalf. This will depend on whether the payroll company submitted ERC claims individually or in batches.

What happens next? — The IRS will send a letter letting the employer know if their request is approved or denied. If it’s accepted, the employer might need to submit an amended return.

The IRS is also developing a settlement program that will allow taxpayers to repay ERC money if they’ve already cashed or deposited a payment they shouldn’t have. Details on that program are expected later this year.

Reach out to us if you have questions about an ERC claim.