The Employee Retention Credit (ERC) was a vital lifeline for many businesses during the pandemic's economic uncertainty. The IRS has released instructions for businesses who have submitted for the ERC but have realized they don’t qualify, and now want to withdrawal their claim. This is for businesses who have NOT received any ERC money (or cashed the check if received).
The reason for withdrawing the claim can be due to various reasons, such as:
Changes in eligibility: Businesses may have initially believed they were eligible for the credit but later discovered they weren't.
Incorrect calculations: Claims may have been filed with unintentional errors in calculations.
Concerns about potential audits: Some businesses may be worried about potential IRS audits and want to play it safe by withdrawing their claims.
The instructions for withdrawal vary based on where you are in the process, but I’m more curious to see how the IRS handles businesses who did cash the checks, and now want to return the money. My suggestion would be to waive interest and penalties for any businesses return the ERC in exchange for providing information on the company who submitted the claim.
Important Additional Points:
If you've already received the ERC refund but haven't cashed or deposited the check, you can still withdraw your claim by mailing the voided check to the IRS along with a withdrawal request.
If you made any other changes on your adjusted employment tax return besides the ERC claim, or if you only need to reduce your ERC claim amount, you can't use the withdrawal process. Instead, you'll need to file an amended return.
It's highly recommended to consult with a tax professional before withdrawing your ERC claim. They can help you determine if withdrawal is the right option for your specific situation and guide you through the process to ensure it's done correctly.
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