New ERTC Withdrawal Program Announced
When the IRS announced the moratorium on Employee Retention Tax Credit (ERTC) claims processing last month there was also mention about new additional program designed to assist taxpayers which had already filed a claim. The first is aimed at helping those who may have erroneously filed an eligible claim (Withdrawal Program), while the other targets those who have may have improperly received payment (Settlement Program).
Last week the IRS published IR-2023-193 which provides guidance on how eligible businesses can leverage the Withdrawal program to remove ineligible claims from IRS consideration. Essential information such as eligibility criteria and how to claim a withdrawal are provided. To help clients, prospects, and others, Barnes Dennig has provided a summary of the key details below.
Not all businesses that submitted an ERTC claim are eligible to participate in the program. Only employers that meet all the following criteria can participate. The claim must have been made on an adjusted employment return, filed an adjusted return only to claim the credit, want to withdraw the entire amount, and the claim has not been paid, or the issued check has not yet been cashed. For those who do not meet this criterion, the IRS advises filing an amended return.
The IRS notes for bad actors that willfully filed a fraudulent ERTC claim, or assisted/conspired to do so, withdrawing a fraudulent claim will not exempt one from potential criminal investigation and persecution.
There are different steps which must be followed depending on the taxpayer’s circumstances. The guidance highlights three scenarios and steps needed to submit a claim. This includes those that have not received a refund and are not under audit, those that have not received a refund but are under audit, and those that have received a refund but have not deposited it.
There is one important exception. For employers that use a professional payroll company to file an ERTC claim it may be necessary to have them request a withdrawal. This is because if the claim was filed in a batch rather than individually different procedures need to be followed.
- Scenario 1 – For those businesses which do not receive a refund and are not under audit the process is straightforward. To request a withdrawal, make a copy of the adjusted return with the claim to withdrawal and in the left margin of the first page write “Withdrawn”. Then in the right margin on the same page have an authorized person sign and date and write their name and title next to the signature. When completed, fax the updated return to the IRS claim withdrawal hotline at 855-738-7609. Remember a separate claim must be submitted for each tax period in which a request is made.
- Scenario 2 – For businesses that did not receive a refund and are under audit there are a few more steps to follow. To request a withdrawal, complete all the steps included above but DO NOT fax the documentation as outlined above. Rather, if you have been assigned an examiner, communicate with them about how to submit the request directly to them. If no examiner has been assigned, then respond to the audit notice with the withdrawal request, using the enclosed instructions.
- Scenario 3– For those that have received payment but did not cash it there are other steps to follow. First, prepare the claim withdrawal request as outlined above. Then write “Void” on the back of the check in the signature panel. Include a note that says, “ERC Withdrawal” and briefly explain the reason for returning the check. Then mail the documentation to the Cincinnati Refund Inquiry Unit. It is always a good idea to track the mailing to ensure delivery is successful.
The IRS will send a written letter notifying the taxpayer whether the withdrawal request was accepted to rejected. A request should not be considered approved until an acceptance letter is received.
Did you know the IRS has announced an immediate moratorium on processing new claims through the end of 2023? Learn more about the suspension on new claims here. You can also learn about the increasingly common forms of ERTC fraud, and how to stay ahead of them here.
Questions? Contact us
If you have questions about the information outlined above, Barnes Dennig can help. For additional information contact us here. As always, we are here to help.