ERC withdrawal procedures announced (10-18-23)

The IRS announced new ERC withdrawal procedures today for taxpayers who filed Employee Retention Credit (ERC) claims and are concerned about whether they actually qualify. (IR-2023-93) The withdrawal procedures are in response to IRS concerns about the onslaught of overly aggressive marketers and promoters who mislead businesses into believing they are eligible for refund claims when they are not.

The volume of questionable ERC claims led the IRS to announce a moratorium through the end of 2023 on processing any new ERC claims. (See our September 14, 2023, flash e-mail, “Effective immediately, the IRS is putting a hold on processing new ERC claims,” available at: www.caltax.com/news/flash-email/2023-39-effective-immediately-the-irs-is-putting-a-hold-on-processing-new-erc-claims/)

Taxpayers are eligible to withdraw their ERC claims if all of the following apply:

• They made the claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, or CT-1X);
• They filed the adjusted return only to claim the ERC, and they made no other adjustments;
• They want to withdraw their entire ERC claim; and
• The IRS has not paid their claim (or if the IRS has paid their claim, the taxpayer hasn’t cashed or deposited the refund check).

Taxpayers who have received their refund but haven’t cashed or deposited their refund check can still withdraw their claim by mailing the voided check back to the IRS with their withdrawal request.

Taxpayers whose ERC claims are currently being audited can send their withdrawal request to the assigned examiner or respond to the audit notice if no examiner has been assigned.

Taxpayers who are not eligible to use the withdrawal procedures because they don’t meet the requirements listed above can still reduce or eliminate penalties by filing amended employment returns.

Detailed procedural instructions for requesting an ERC withdrawal can be found on the IRS’s special webpage set up for this purpose at:

www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim

Withdrawing a fraudulently filed claim will not stop criminal prosecution of the taxpayer or preparer if the credit was fraudulently claimed.

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The IRS is putting a hold on processing new ERC claims 09-14-23

Tax • Analysis • Education

Effective immediately, the IRS is putting a hold on processing new ERC claims (09-14-23)

The IRS announced today that it has stopped processing all new Employee Retention Credit (ERC) refund claims and will continue its moratorium at least through December 31, 2023. (IR-2023-169)

In IRS Commissioner Werfel’s words:

“The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in. ... The continued aggressive marketing of these schemes is harming well-meaning businesses and delaying the payment of legitimate claims, which makes it harder to run the rest of the tax system.”

The IRS is continuing to process ERC claims filed prior to today’s announcement, but even those claims will face long processing delays (up to 180 days, from 90 days) because the IRS is placing stricter compliance reviews on all claims.

Today’s release does not specifically advise taxpayers to not file new claims. It only states that the IRS will not process any new claims until January 2024 at the earliest.

Taxpayers whose ERC claims are currently in process may:

• See requests for additional substantiation from the IRS before the claim’s processing is complete;
• Be referred to the IRS’s examination division for audit;
• Be referred to the IRS’s criminal investigation division if the egregious nature of the claims warrants it; or
• Soon be able to withdraw filed, but unprocessed, ERC claims under a special program, the details of which are still being worked out by the IRS.
• Additionally, the IRS is developing a new settlement program for taxpayers who received an improper ERC payment. Per today’s release, more information on this program will be available this fall.

The IRS’s release is available at the following link and contains advice for taxpayers whose ERC claims may be in various stages. Go to:

www.irs.gov/newsroom/to-protect-taxpayers-from-scams-irs-orders-immediate-stop-to-new-employee-retention-credit-processing-amid-surge-of-questionable-claims-concerns-from-tax-pros