On September 14, 2023 the IRS announced a pause in accepting any new Employee Retention Credit (ERC) claims through the end of 2023 due to the large number of highly questionable ERC claims filed.  

There were a number of aggressive service providers who mislead taxpayers by convincing them that they were eligible for the ERC, when in fact they did not meet the ERC requirements. Due to the IRS’ concerns, the withdrawal procedures were set in place giving taxpayers an opportunity to make things right ahead of time.

On October 19, 2023 the IRS released new ERC withdrawal procedures for taxpayers who filed ERC claims and but did not qualify for these credits. If taxpayers meet all the requirements below, they are eligible to withdraw their ERC claims with the IRS:

  • The taxpayer wants to remove their entire ERC claim; 
  • The IRS has not paid their claim or the taxpayer has received a check but they haven’t cashed or deposited the refund check. The taxpayer can in turn mail the voided check with their withdrawal request back to the IRS;
  • A claim was made on an adjusted employment return (e.g. Forms 941-X, 943-X, 944-X, or CT-1X); and 
  • The taxpayer filed the adjusted return only to claim the ERC and did not make any other adjustments.

Taxpayers can send their withdrawal request to the assigned examiner or respond to the audit notice if an examiner has not yet been assigned for any ERC claims that are being audited by the IRS.

Taxpayers can still eliminate or decrease penalties by filing amended employment returns even if they do not meet the requirements listed above and are ineligible to use the withdrawal procedures.

The IRS’s webpage provides detailed instructions for requesting an ERC withdrawal and can be found on www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim

Taxpayers who have yet to file ERC refunds but meet the guidelines (as outlined in our previous blog) may still wish to file claims for refund if and when the IRS opens up the processing to ensure their application will be top of queue.

 

Joyce Kandt, principal, leads the firm’s tax credits and incentives practice. Contact Joyce today regarding your eligibility and for an assessment of potential credits. Aura Advisors is a boutique tax consulting and compliance firm working with start-ups, emerging growth companies, and affluent individuals. Making it safer for good people and good companies to continue to do good things.