The IRS has introduced a withdrawal option aimed at assisting small business owners and individuals who may have been coerced or misled by ERC (Employee Retention Tax Credit) marketers into filing ineligible claims. This withdrawal option allows for the retraction of claims, treating them as if they were never submitted, without incurring penalties or interest. It is a response to ongoing aggressive tactics by marketers and scammers related to ERC claims.
However, it's crucial to note that the withdrawal option does not shield those who willfully filed fraudulent claims or those who were involved in fraudulent conduct from potential criminal investigation and prosecution.
This initiative follows the IRS's recent announcement of a moratorium on processing new claims until at least the end of 2023, coupled with the referral of thousands of ERC claims for audit. As part of their review process, the IRS may request additional documentation from taxpayers to validate the legitimacy of their claims.
The ERC, designed for businesses affected by the COVID-19 pandemic, offers a refundable payroll tax credit for those who continued paying employees during specified periods of business disruption. However, aggressive marketing schemes around the ERC have led to potential harm for well-intentioned businesses.
The withdrawal option is especially pertinent for employers with pending claims, providing an opportunity to rectify potential issues before they escalate. The IRS emphasizes the importance of consulting with trusted tax professionals rather than relying on marketing companies for guidance on this complex tax credit.
To be eligible for the ERC claim withdrawal process, employers must have made the claim on an adjusted employment return, filed the adjusted return solely for the ERC without other adjustments, and wish to withdraw the entire claimed amount. The withdrawal process is applicable if the IRS has not paid the claim or if the claim has been paid, but the refund check remains uncashed.
For those not eligible for the withdrawal process, they can still modify or eliminate their ERC claim by filing an amended return.
To initiate the withdrawal process, taxpayers can follow specific instructions outlined on IRS.gov/withdrawmyERC. Depending on whether a professional payroll company filed the ERC claim, consultation with the payroll company may be necessary. Taxpayers who filed claims independently can fax their withdrawal requests using a dedicated IRS fax line or mail them following provided instructions.
Employers under audit can submit withdrawal requests to their assigned examiner or respond to the audit notice. Even for those who received a refund check but haven't cashed it, withdrawal is possible by mailing the voided check with the withdrawal request.
If there are concerns about the validity of a submitted ERC claim or if assistance is needed with withdrawing a claim, individuals are encouraged to contact their tax professional or seek guidance from the IRS.
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