Understanding the New ERC Withdrawal Procedures Announced by the IRS

The Internal Revenue Service (IRS) has recently announced new withdrawal procedures for taxpayers who have filed Employee Retention Credit (ERC) claims and are uncertain about their eligibility (IR-2023-93). This move comes in response to the IRS's concerns about the surge of aggressive marketers and promoters who have been misleading businesses into believing they qualify for refund claims when they do not.

The influx of dubious ERC claims has prompted the IRS to declare a moratorium on processing any new ERC claims until the end of 2023. This decision was communicated in our flash email dated September 14, 2023, titled “Effective immediately, the IRS is putting a hold on processing new ERC claims.”

The new withdrawal procedures allow taxpayers to withdraw their ERC claims if they meet the following criteria:

1. The claim was made on an adjusted employment return (Forms 941-X, 943-X, 944-X, or CT-1X).

2. The adjusted return was filed solely to claim the ERC, with no other adjustments made.

3. The taxpayer wishes to withdraw their entire ERC claim.

4. The IRS has not paid their claim, or if the claim has been paid, the taxpayer has not cashed or deposited the refund check.

Taxpayers who have received their refund but have not cashed or deposited their refund check can still withdraw their claim by mailing the voided check back to the IRS with their withdrawal request.

For taxpayers whose ERC claims are currently under audit, they can send their withdrawal request to the assigned examiner or respond to the audit notice if no examiner has been assigned.

Taxpayers who do not meet the above requirements for withdrawal can still reduce or eliminate penalties by filing amended employment returns. Detailed instructions for requesting an ERC withdrawal can be found on the IRS’s special webpage: www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim

It's important to note that withdrawing a fraudulently filed claim will not prevent criminal prosecution of the taxpayer or preparer if the credit was fraudulently claimed.

At Nebulae Profit Solutions, we understand that navigating these new procedures can be complex. We're here to help guide you through the process and ensure you're making the best decisions for your financial health. Contact us today for more information.