October 19, 2023

IRS Announces ERC Withdrawal Program Details

The high amount of fraud plaguing the Employee Retention Tax Credit (ERC) program reached a tipping point forcing the IRS to take action. Last month, the agency announced a moratorium on new claims processing through the end of the year. The time is needed to review existing claims more carefully and to implement programs to assist those who may have improperly filed claims. On October 19^th, the IRS release Notice IR- 2023-193 which provides guidance for those who wish to withdraw a claim. Depending on the taxpayer’s situations there are different steps which must be followed. Only those that want to completely withdrawal a claim can participate. To help clients, prospects, and others Wilson Lewis has provided a summary of the key details below.

Program Eligibility

Not all businesses with irregularities in an ERTC are eligible to participate. Only those that meet all the following conditions can participate, including:

• A claim was made using an adjusted employment tax return (Form 941-x, etc.)
• An adjusted return was filed only for the purpose of claiming the credit and did not include any other adjustments.
• The taxpayer desires to withdraw the entire amount of the claim. Those that want to make an adjustment to the credit amount will need to be made by submitting an amended return.
• The IRS has not paid the claim, or if the agency has, then the taxpayer must not have cashed or deposited the refund check.

The IRS points out that taxpayers who willfully filed a fraudulent claim, or assisted or conspired to do so, will not be exempt from criminal investigation and prosecution by simply withdrawing the claim.

Requesting a Claim Withdrawal

The streps involved in requesting a withdrawal vary depending on the taxpayer’s situation. There are separate steps for those who have not received a refund and the claim is not under audit, haven’t received a refund, but the claim is under audit, and have a refund check but have not yet cashed it.

It is important to note that if a business used a professional payroll provider to file an ERTC claim, then the first step is to consult with that company. Depending on how a claim was filed, individually or as a batch, will impact whether the payroll provider will need to be involved in the process.

Scenario 1 – No Refund Issued and Claim is Not Under Audit

Taxpayers that filed an adjusted return to claim the credit and would like to withdrawal the entire claim should follow this process. Those that filed adjusted returns for more than one quarter will need to submit a request for each tax period. The steps include:

• Make a copy of the adjusted return along with the desired claim to be withdrawn.
• In the left margin of the first page write, “Withdrawn”.
• In the right margin of the first page an authorized person must sign and date the document and write their name and title next to the signature.
• Fax a signed copy of the return to the ERC Claim Withdrawal fax line at 855-738-7609. This is the withdrawal request and records should be retained.

Scenario 2 – No Refund Issues and Claim is Under Audit

Taxpayers that have been selected for an audit should follow this process. The first step is to complete the preparation process listed above, but do not send by mail or fax. Instead, discuss with the assigned examiner where to send the request. In the event an examiner has not been assigned, respond to the audit notice with the withdraw request using the included instructions.  

Scenario 3 – A Refund Check has been Received but not Cashed/Deposited

Taxpayers in this situation should follow the claim preparation process outlined in Scenario 1. Rather than faxing the request, the taxpayer should write void on the endorsement section on the back of the check. Include a note that says ERC Withdrawal and briefly explain the reasons for returning the check. Compile all the documentation and then submit to the agency.  

Request Acceptance

Once submitted taxpayers need to wait for a letter from the IRS confirming the withdrawal request was accepted (or rejected). An approved request is not considered official until an acceptance letter is received.

Contact Us

This program represents an important opportunity for Atlanta businesses to withdrawal a claim without having to worry about re-payment, fines, and penalties.  If you have questions about the information outlined above, or would like to review your claim, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.