On Thursday, October 19, 2023, the IRS released the process for certain taxpayers who wish to withdraw previously filed ERC claims. This comes on the heels of the IRS announcement last month that they were halting the processing of future claims until at least the end of 2023.
If you no longer believe you qualify for the ERC, this process offers a streamlined approach to withdraw previously filed claims. Additionally, withdrawn claims are treated as though they were never filed; therefore, the IRS will not impose penalties and/or interest. However, you could still be subject to potential criminal investigation if thought to have willfully filed fraudulent ERC claims.
The withdrawal process will not be applicable for all taxpayers. It will not apply to:
- Those who have already received and cashed or deposited the refund check, and
- Those who do not wish to withdraw the entire filed return.
The entire return may not be able to be withdrawn if it included changes other than the ERC claim, or if you used a Professional Employer Organization (PEO). If you used a PEO, the IRS suggests consulting with your provider to determine whether the claim was filed individually or batched with other customers of the PEO, as the PEO may need to submit the withdrawal request. If the entire return cannot be withdrawn, you will need to file a new amended return.
Who Is Eligible to Withdraw Their ERC Claims?
You must meet all of the following criteria to be eligible for the current withdrawal process:
- Claim was made on an amended employment tax return (Forms 941-X, 943-X, 944-X or CT-1X);
- The amended return was filed to claim the ERC with no other changes from the original return;
- The entire amount of the ERC claim is to be withdrawn; and
- The IRS has either not paid the claim, or the IRS has paid the claim but the refund check has not been cashed or deposited.
The withdrawal process is generally the same for all taxpayers; however, there are some slight differences on the submission process depending on whether or not you have received a refund check and whether or not you have been notified the claim is under audit.
How to Withdraw Your ERC Claim
The following general steps apply to all taxpayers:
- Make a copy of the amended return that includes the ERC claim you are withdrawing.
- Down the left margin of the first page, write “Withdrawn.”
- Down the right margin, write your name, position in the organization, and sign and date.
View the IRS’ example of how to mark up the request.
How to Submit Your ERC Withdrawal Request
Here’s how to submit:
- If you have not received a refund check or been notified the claim is under audit, fax the signed request to the ERC claim withdrawal fax line at 855.738.7609.
- If you have not received a refund check but have been notified the claim is under audit, the submission process will depend on whether or not you have been assigned an examiner.
- If an examiner has been assigned, communicate with the examiner to submit the request directly to them.
- If an examiner has not been assigned, submit the withdrawal request by responding to the audit notice per the notice instructions.
In addition to the withdrawal request steps above, if you have received but not cashed or deposited the refund check, you must do the following:
- Write “Void” in the endorsement section on the back of the check, and
- Include a note that says “ERC Withdrawal” with a brief explanation of the reason for returning the refund check.
Mail the withdrawal request, voided check and note to:
Cincinnati Refund Inquiry Unit
PO Box 145500
Mail Stop 536G
Cincinnati, OH 45250
Note, it’s a good idea to add tracking to the envelope to ensure it arrives safely.
What Happens After You Submit Your ERC Withdrawal Claim?
You will receive a letter informing you if the IRS accepted your withdrawal request. If accepted, work with your tax advisers to review your prior income tax returns and amend as needed to deduct wages that may have been excluded as a result of claiming the ERC.
In addition to the withdrawal process outlined above, the IRS indicated in their September announcement that a settlement program would be available for taxpayers who have already received and cashed or deposited their ERC refund checks. If you are ineligible for the withdrawal process, be on the lookout for details on the settlement program as they become available.
Contact Robert Venables at email@example.com or a member of your service team to discuss this topic further.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.