IRS Announces ERC Withdrawal Process

ARTICLE | October 24, 2023

The Internal Revenue Service (IRS) has established guidelines concerning the withdrawal of an Employee Retention Credit (ERC) claim. These guidelines, detailed on the IRS’s official website  here, outline the necessary steps a taxpayer must take to withdraw a claim for the ERC, under certain conditions.  

The Employee Retention Credit was established in response to the economic hardships caused by the COVID-19 pandemic. The credit was designed to encourage businesses to maintain their employees on the payroll, even during times of financial strain. The ERC provides a tax credit for employers, based on a percentage of the qualified wages paid to employees. In a previous release the IRS indicated that they believe many ERC claims have been filed by those who do not qualify for the credits.

The IRS is offering a way for employers who filed a claim requesting a refund for the ERC and now believe they may not be eligible for the ERC to withdraw their claim. The method is available only to those who have not yet received a refund and whose claim is currently in process with the IRS. Withdrawing the claim before any refund is issued will allow employers to avoid future repayment of invalid refunds and potential penalties and interest.

To withdraw an ERC claim, the taxpayer must submit a written request to the IRS. The request must clearly state that the taxpayer is withdrawing the ERC claim, identify the quarters for which the claim is being withdrawn, and include a declaration signed under penalties of perjury.  The IRS has set up a specific mailing address for these withdrawal requests, which is found on their website. The taxpayer should use the U.S. Postal Service to mail the request or a private delivery service approved by the IRS. It’s important to note that the IRS will not accept withdrawal requests via fax or electronic submission.

Once the IRS receives the withdrawal request, they will send a written acknowledgment to the taxpayer. However, the IRS is not required to act on the request to withdraw the claim. If they decide to accept the withdrawal, they will notify the taxpayer.

In conclusion, withdrawing an ERC claim is an option available to taxpayers, providing they follow the steps outlined by the IRS. Businesses considering this route should review the IRS guidelines thoroughly and seek advice from a tax professional to ensure they are making the best decision for their situation.