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October 27, 2023

IRS Outlines Withdrawal Process for Employee Retention Tax Credit Claims

After announcing an immediate moratorium on processing new Employee Retention Tax Credit (ERTC) claims, the IRS has issued new guidelines on a special withdrawal process. If an employer filed an ERTC claim, the withdrawal process potentially allows them to withdraw their claim and avoid costly repayments compounded by interest and additional penalties. This process aims to give small business owners and other well-intentioned employers an option if they were misled or pressured by aggressive ERTC promoters into filing ineligible claims, but not all employers qualify.

Key Takeaways:

  • On September 14, 2023, the IRS announced the agency would pause processing on new ERTC claims as a result of aggressive ERTC marketers
  • Small business owners and other employers who filed an ERTC claim but haven’t yet received a refund can withdraw their submission, which is then treated as if it was never filed
  • This new process targets businesses that were misled or pressured by aggressive ERTC promoters into filing ineligible claims
  • To be eligible for the withdrawal process, employers must meet all four qualifications
  • Taxpayers who purposefully filed fraudulent claims may still face potential criminal investigation and prosecution even if they withdraw a fraudulent claim

Withdrawing Your Pending ERTC Claim

To protect small businesses and organizations from scams targeting the CARES Act ERTC program, the IRS issued new guidelines for a special withdrawal process to help employers who filed a claim and have concerns about its accuracy.

Some aggressive marketers have pushed businesses to apply for the credit, even when they are ineligible, and charge exorbitant rates. In the end, the business is left on the line for repaying the credit, plus interest and penalties while the marketer swans off with their fee. The IRS Commissioner has urged businesses to “consult with a trusted tax professional rather than a marketing company about this complex tax credit,” but offers the withdrawal process as “a way out” for businesses that fell victim to the scams. Employers can use the ERTC claim withdrawal process if all of the following apply:

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

Anders used a measured approach in determining client eligibility. We are confident that our analysis remains compliant, negating the need for our clients whose ERTC claims were managed by Anders to avail themselves of this program.

More guidance will be released to help employers who have already received an ERTC payment after being misled into claiming it. Be aware that some marketers and scammers have revised their ERTC pitches following the September 14th moratorium announcement. In some cases, these marketers may push employers who submit an ERTC claim into agreeing to costly up-front loans in anticipation of a refund. This is not advisable and could be disastrous for a business. If in doubt, consult with a trusted tax professional, as the IRS urges, before making unsound financial decisions.

The Anders CARES Act Consulting team will continue to monitor updates from the IRS concerning the Employee Retention Tax Credit to keep our clients informed. Check out our CARES Act Relief Radar for all pandemic relief-related funding updates.

Due to this new IRS guidance, Anders will no longer be accepting new ERTC clients until the IRS issues additional guidance related to the moratorium and the options available to affected businesses.

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