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Published:   |   Last Updated: February 8, 2024

TAS Tax Tip: Resolving an Improper ERC Claim

What do to if you realize you do not qualify for an Employee Retention Credit you claimed

ERC claim

If you have determined you do not quality for an Employee Retention Credit (ERC)you claimed, the IRS has provided guidance on whether you can withdraw your claim, and if so, how to withdraw your claim.    

On October 19, the IRS announced details of how to withdraw an ERC claim. Taxpayers should carefully follow the special instructions at IRS.gov/withdrawmyERC summarized below.  

  • If a professional payroll company filed your ERC claim, consult with the payroll company. The payroll company may need to submit the withdrawal request for you, depending on whether your ERC claim was filed individually or batched with others.
  • If you filed your ERC claim yourself, haven’t received, cashed or deposited a refund check, and have not been notified your claim is under audit, fax your withdrawal request to the IRS. The IRS has set up a special fax line, 855-738-7609, to receive withdrawal requests. This enables the agency to stop processing a claim before the refund is approved. If you are unable to fax your withdrawal, you can mail it, but it will take longer for the IRS to receive your request.
  • If you have been notified you are under audit, send the withdrawal request to the assigned examiner or respond to the audit notice if no examiner has been assigned.
  • If you received a refund check, but haven’t cashed or deposited it, you can still withdraw your Mail the voided check with your withdrawal request using the instructions at IRS.gov/withdrawmyERC.

If you request to withdraw your claim, you’ll be asking the IRS not to process your entire adjusted employment tax return (Form 941-X, 943-X, 944-X, CT-1X) for the tax period that included your ERC claim. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.  Note, however, that withdrawing a fraudulent ERC claim will not exempt you from potential criminal investigation and prosecution. 

If you made any other changes on the adjusted employment tax return or you only need to reduce your ERC claim (not withdraw it entirely), you can’t use the withdrawal process. Instead, you need to amend your return. For more information on these situations, see the Correcting an ERC claim – Amending a return section of the frequently asked questions about the ERC. 

IRS.gov/withdrawmyERC provides the following information:  

The IRS is working on guidance to help employers that were misled into claiming the ERC and have already received and cashed or deposited the refund check. More details will be available this fall. 

What happens next?

The IRS will send you a letter telling you whether your withdrawal request was accepted or rejected. Your request is not approved until you receive an acceptance letter from the IRS. 

If your withdrawal is accepted, you may need to amend your income tax return. See Claiming the ERC for an explanation of how the ERC affects your income tax return. If you need help, seek out a trusted tax professional. 

Stay current on the IRS’s inventory status by monitoring IRS Operations: Status of Mission-Critical Function (Filed a Return in 2022/Status of Processing Form 941) and review IRS.gov/erc for updates. 

Webinar

Tax professionals and others can listen to the recorded Nov. 2 IRS webinar, Employee Retention Credit: Latest information on the moratorium and options for withdrawing or correcting previously filed claims.

Q&As at the end of the webinar answered several questions including:  

  • How does a taxpayer withdraw an ERC claim filed by a Professional Employer Organization? 
  • When does the withdrawal program end?  
  • Can taxpayers withdraw their ERC claim for just some quarters?  
  • If a taxpayer was not aware a third party filed a duplicate ERC claim can they withdraw the 2nd claim?  
  • Can an ERC claim still be filed during the moratorium period?  
  • What options are available for a taxpayer to partially withdraw their claim?

Additional Resources  

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