On October 24th, the IRS posted new information on its website on how employers can withdraw their ERC claim. An employer may be interested in taking such a step if they were pressured into filing an ERC claim based on erroneous information from an ERC promotor or now believe they are ineligible for the tax credit. Only certain claims can be withdrawn, primarily those that have not yet been processed by the IRS, or in cases where the employer may have received a refund check but has not cashed or deposited it yet. The steps for withdrawing an ERC claim vary depending on the organization’s current circumstances and should be followed carefully. The benefit of withdrawing such an ineligible claim is that it will be treated like it was never filed, and so penalties and interest will not be assessed. The IRS does warn that fraudulent claims that are withdrawn will still be prosecuted.
The IRS is making this withdrawal option available in recognition that many employers may have been misled into believing they were eligible to file. For organizations who already received their ERC refund, the IRS still plans to issue instructions on how those funds can be returned (hopefully, without penalty/interest), if the organization now believes they were misled or were ineligible based upon the new IRS guidance. Members who want to familiarize themselves with the new IRS guidance on ERC to evaluate the eligibility of their claim can watch the recent LeadingAge Quick Cast that highlights some of the key changes.
