IRS Launches New ERC Withdrawal Process to Combat Fraud

AAFCPAs would like to make clients aware that the IRS has released details of its special Employee Retention Credit (ERC) withdrawal process. This initiative is designed to assist employers who filed an ERC claim but have concerns about its accuracy due to pressure or misleading advice from ERC marketers or promoters. The new withdrawal option is available to employers that have not yet received a refund, have not been notified of a claim audit, or have not cashed a refund check. When withdrawing a claim using this new process, an employer’s submission will be treated as if it had never been filed. This helps employers avoid future repayment, interest, and penalties.

The ERC is a complex credit designed to benefit businesses that continued to pay employees during the COVID-19 pandemic. This includes those that paid employees through full or partial business suspension due to a government order or through a significant decline in gross receipts during eligibility periods. However, since its implementation, marketers and scammers have persuaded employers to file ERC claims for which they may not have been eligible. The new claims withdrawal process follows a moratorium on processing new ERC claims after the IRS received an influx of ineligible filings.

Employers may use the new 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 have not cashed or deposited the check.

If an employer does not meet the above criteria and is, thus, ineligible to use the new withdrawal process, it may still reduce or eliminate an ERC claim by filing an amended return. Please reach out to your AAFCPAs advisor for assistance in navigating complex ERC rules, determining program eligibility, assessing the accuracy of the calculation of the claim, and devising an action plan.

If you have questions, please contact Courtney McFarland, CPA, MSA, 340B ACE, Partner at 774.512.4051 or cmcfarland@aafcpa.com—or your AAFCPAs Partner.