IRS Offers Lifeline for Companies Affected by Ineligible Claims and Marketing Scams

The Internal Revenue Service (IRS) announces a Streamlined program for ERC Claim Withdrawals allowing businesses to request withdrawal ERC claims submitted, but not fully processed. This new program aims to help companies who have been affected by ineligible claims and marketing scams.

The Employee Retention Credit (ERC) initially part of the CARES Act in 2020, and the programs applicability has been extended through 2021 under the Consolidated Appropriations Act. The intentions behind the tax credit were determined based on the financial relief qualifying employers desperately needed due to significant delays or business interruption along with others experiencing substantial deceases in revenue due to the COVID-19 pandemic.

Unfortunately, some businesses have faced challenges when claiming the ERC. Ineligible claims and marketing scams have caused confusion and delays in the application process, making it difficult for legitimate businesses to receive the much-needed assistance.

Streamlined Withdrawal Process: Aiding Employers to Safeguard Against Future Liabilities

The IRS’s newly implemented withdrawal facility serves as a lifeline for employers who have lodged an Employee Retention Credit (ERC) claim but have not yet received a refund. This unique feature empowers them to retract their claim, effectively evading impending repayments, accrued interest, and potential penalties that could substantially impact their financial viability. It’s a proactive step for employers to shield themselves from the repercussions of receiving an ineligible refund. Moreover, this option is also available to those employers whose ERC claim is currently in the review process, allowing them to prevent potential risks associated with receiving and then having to return an ineligible refund. Through this streamlined process, the IRS aims to provide an additional layer of flexibility and control to businesses in a time of unprecedented economic challenges.

Eligibility Criteria for Withdrawing an ERC Claim

An employer is eligible to utilize the ERC claim withdrawal mechanism if they meet all the stipulated conditions:

    1. The claim was lodged using an adjusted return (Forms CT-1X, 944-X, 943-X 941-X).
    2. The adjusted employment return was exclusively filed to claim the ERC, with no other alterations made.
    3. The intention is to retract the full amount of their ERC claim.
    4. The claim has either not been fulfilled by the IRS, or although the IRS has issued the refund, the recipient has yet to cash or deposit the check.

Employers who fail to meet these criteria but still wish to reduce or nullify their ERC claim can do so by submitting a revised return. 

Options for ERC Claim Withdrawals

Taxpayers wishing to withdraw an ERC claim must comply with a strict procedure. Here are some options: 

Contacting Your Payroll Firm for ERC Claim Withdrawals

If your ERC claim was filed on your behalf by a professional payroll firm, it’s recommended that you get in touch with them to initiate the withdrawal process. Depending on whether the ERC claim was submitted individually or as part of a batch, the firm may be required to send the withdrawal request on your behalf.

Sending ERC Withdrawal Requests via Fax

Those who have independently filed their ERC claims and have not received, encashed, or deposited a refund check, nor been notified of any audit, should transmit their withdrawal application via fax from a computer or mobile device. A specific fax line is in place at the IRS to manage such requests, which helps in suspending the refund process before it gets approved.

Withdrawing ERC Claim During IRS Audit

If you are in receipt of an audit notice, there are specific steps you should take immediately. An ERC claim withdrawal request may be provided directly to the auditor working your case. However, if an auditor from your local IRS office is not yet assigned, then you may be able to send a withdrawal request to the sender’s address listed on the IRS notice. It is important to adhere to proper correspondence procedures when communicating with the IRS. At the same time, it is important to follow IRS’s guidance, IRS FAQs for ERC Claim Withdrawals. It may be prudent to seek the assistance of a tax professional familiar and experienced in IRS tax audits and resolutions.

Also, if you are in possession of an undeposited refund check but haven’t deposited it yet, the option to retract your claim still exists. The IRS allows for the withdrawal of claims under such circumstances, providing additional flexibility to taxpayers.

Need Help? Talk to a Tax Audit and Compliance Lawyer at Anidjar Law

If you are facing an IRS audit or have any questions regarding the ERC claim withdrawals process, it is always recommended to seek help from a professional tax audit and compliance lawyer. Anidjar Law has a team of experienced professionals who focus on tax law and can provide professional guidance on navigating the withdrawal process. Contact us today for a consultation and let us assist you in resolving your tax-related issues.


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