The IRS announced on October 19 the details of a special withdrawal process to help employers who filed an employee retention credit (ERC) claim and are now concerned about its accuracy in light of the IRS’s broader program warning about invalid claims.  

Who can ask to withdraw an ERC claim?

Employers can use the ERC claim withdrawal process if all of the following apply:

• They made the claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X).
• They filed the adjusted return only to claim the ERC, and they made no other adjustments.
• They want to withdraw the entire amount of their ERC claim.
• The IRS has not paid their claim, or the IRS has paid the claim, but they haven’t cashed or deposited the refund check.

Procedure for employers who want to reduce – but not withdraw — an ERC claim Ineligible employers who have not yet received or cashed the refund check can reduce or eliminate their ERC claim by filing an amended Form 941 -X. For more details, see the “Amending a Return” section of the Frequently Asked Questions About the Employee Retention Credit.  

How to withdraw an ERC claim

To take advantage of the claim withdrawal procedure, taxpayers should carefully follow the special instructions at the website IRS.gov/withdrawmyerc. If a professional payroll company filed the ERC on the taxpayer’s behalf, the taxpayer should reach out to the professional payroll company to initiate the withdrawal. Otherwise, an employer:

• Whose claim is not under audit should fax a withdrawal request to the IRS’s special fax line – 1-855-738-7609 — using a computer or mobile device so the IRS will stop processing the original ERC claim.
• Whose claim is under audit should send the withdrawal request to the assigned examiner or, if no examiner has been assigned, as a response to the audit notice.

Any employer that has an uncashed or undeposited ERC refund check who is withdrawing the claim should mail the voided check with their withdrawal request, following the instructions at IRS.gov/withdrawmyerc.  

What about concerned employers who have cashed ERC claim checks?

The IRS is also working on guidance to help employers that were misled into claiming the ERC and have already received the payment. More details will be available this fall.  

What happens after the claim withdrawal request is submitted?

Upon processing the withdrawal request, the IRS will notify the taxpayer whether the request was accepted. The IRS reminds taxpayers that they may have to amend their income tax return if the withdrawal request is accepted. The IRS also continues to encourage employers to seek out a trusted tax professional who understands the complex ERC rules, not a promoter or marketer “trying to get a hefty contingency fee while taking advantage of honest taxpayers,” according to the announcement.  

At Cavanaugh & Co, we work with individuals and businesses to help them make smart financial decisions. Contact us today to schedule an appointment.