The IRS recently announced a limited-application withdrawal process for employee retention credit (ERC) claims, allowing certain employers that filed a claim but have not yet received a refund to withdraw their submission and avoid future repayment, interest and penalties. Employers that submitted an ERC claim that's still being processed can withdraw it and avoid the possibility of getting a refund for which they're ineligible. Additionally, employers that have received a refund check but have yet to cash or deposit it may also utilize the withdrawal process.
On the one-year anniversary of the IRS’s initial ERC warning and a little over a month after the IRS issued a moratorium on the processing of new ERC claims (see our previous Tax Alert), the IRS provided guidance on an ERC claim withdrawal process available to certain, but limited, taxpayers.
Who is eligible. Taxpayers can utilize the withdrawal option “if all of the following apply:
How to utilize the processes. Taxpayers should carefully follow the instructions at IRS.gov/withdrawmyerc. In brief, taxpayers:
Those who received a refund check (but haven't cashed or deposited it) can still withdraw their claim. They should mail the voided check with their withdrawal request using the instructions at IRS.gov/withdrawmyerc.
When the program ends. The IRS, during its Nov. 2, 2023 webinar, informally provided that they “do anticipate to sunset the program” but that they “don’t have the date nailed down yet.” The IRS further elaborated that the withdrawal program “could sunset at the end of the moratorium, but that depends on the timing of other programs.”
With approximately 3.6 million ERC claims filed in the over 2.5 years of the ERC’s existence, the withdrawal program seems to have limited scope as it only permits those who’ve recently filed claims or have yet to cash or deposit ERC refund checks. It seems the program was designed to pare down the existing number of ERC claims being processed, which number over 600,000. For those taxpayers ineligible for the withdrawal program on account of having cashed or deposited their refund, the IRS is also working on separate guidance to help those that were misled into making their claim by a credit mill or aggressive promoter. More details are expected later this year.
Taxpayers with ERC claims currently pending with the IRS or those with uncashed or undeposited ERC refund checks should consult their tax advisor to determine whether they should utilize this withdrawal program. This is especially important for taxpayers that utilized an ERC promotion service and have not yet had their ERC eligibility reviewed.
For more information on this topic, or to learn how a Baker Tilly specialist can help, contact our team.
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