The IRS recently announced details around the option to withdraw previously submitted Employee Retention Credit (ERC) claims. The ERC, a refundable credit enacted as a part of The Coronavirus Aid, Relief, and Economic Security (CARES) Act, has faced an influx of fraudulent claims such that the IRS recently announced a moratorium on processing them. The creation of this process for taxpayers to withdraw ERC claims is another way that the IRS is working to address the high volume of inappropriate claims.
To be eligible to withdraw an ERC claim, one must meet all of the following:
- Claimed the ERC on an adjusted employment tax return (Forms 941-X, 943-X, 944-X, CT-1X)
- Filed the adjusted return only to claim the ERC, and made no other adjustments
- Wishes to withdraw the entire amount of the ERC claim
- The IRS has not paid the claim, or if they did pay the claim, the taxpayer has not cashed or deposited the refund check
Importantly, if a taxpayer requests withdrawal, the request is that the IRS not process the entire adjusted employment tax return on which that claim was submitted (i.e., Form 941-X, 943-X, 944-X, CT-1X), such that they will treat it as if it had never been filed. The process ensure that no penalties or interest will be imposed, with the exception of where a willfully fraudulent filing is found. If an ERC claim adjustment is needed (i.e. the taxpayer does not wish to withdraw the entire amount of the ERC claim), then a full withdraw request is not the appropriate process, but rather the taxpayer should consider amending their return instead.
The process for ERC claim withdrawal is:
- Make a copy of the adjusted return with the claim you wish to withdraw.
- In the left margin of the first page, write “Withdrawn.”
- In the right margin of the first page have an authorized person sign it, date it, and write their name and title next to their signature.
- Submit the claim depending on where the taxpayer is in the claim process:
- If the taxpayer has not been notified that the claim is under audit, then fax it to the IRS’s ERC claim withdrawal fax line at 855-738-7609.
- If the taxpayer has been notified that the claim is under audit and has been assigned an examiner, then communicate directly with your examiner about how to best submit the request directly to them.
- If the taxpayer has been notified that the claim is under audit, but has not yet been assigned an examiner, then respond to the audit notice with your withdrawal request, using the instructions in the notice.
- If the taxpayer has received a refund check but has not cashed or deposited it, then VOID the check and send (with tracking and delivery confirmation) the check and a note that says “ERC Withdrawal” with a brief explanation to the Cincinnati Refund Inquiry Unit at:
- PO Box 145500
- Mail Stop 536G
- Cincinnati, OH 45250
- Keep copies of all documentation for your records
The IRS will communicate acceptance or rejection of the withdrawal request directly to the taxpayer. If a withdrawal request is accepted, the taxpayer may need to amend their tax return. The withdrawal process is not the appropriate place for someone who has already cashed an ERC claim check to attempt to undo the claim. That request would be through the IRS’s ERC settlement process, which we are awaiting additional guidance on.
Of course, none of the above applies to or is necessary for appropriately filed eligible ERC claims.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.