IRS Update: New Withdrawal Process for Employee Retention Credit Amid Scam Alert

I've been talking about this for quite some time now: The IRS recently introduced a new withdrawal process for businesses that filed Employee Retention Credit (ERC) claims but are now concerned about their eligibility. This initiative is a direct response to the widespread scams and aggressive marketing tactics targeting small businesses and organizations.

It's important not to confuse the ERC with the Self Employed Tax Credit (SETC), which we are currently assisting people to secure before December 22nd. If you were self-employed in 2020 and 2021, you could be eligible for up to $32,000.

Click here to check your eligibility.

Now, onto the main point: If you've already filed an ERC claim and are still waiting for a refund, you have the option to withdraw your claim. This is significant because it allows you to avoid potential future repayments, interest, and penalties. Moreover, if your claim is in process but you doubt your eligibility, you have the opportunity to retract it.

The IRS is well aware that many small business owners and others were duped into filing these claims by ERC marketers who were less than honest. By withdrawing, these claims will be treated as if they never existed, sparing the filers from penalties and interest.

However, if you knowingly filed a fraudulent claim, or if you helped someone else do it, withdrawing won't protect you from criminal investigation or prosecution. The IRS is pretty clear on this: withdrawing a fraudulent claim doesn't mean you're off the hook.

The ERC, when claimed legitimately, is a refundable tax credit for businesses that kept paying employees during COVID-19 shutdowns or faced significant revenue drops. But it's not a simple handout. The IRS received about 3.6 million claims since the program started and is now shifting its focus to scrutinizing these claims more intensely. They're not just auditing but also investigating promoters and businesses that might have filed dubious claims.

After announcing a moratorium on processing new ERC claims in September, the IRS is now taking longer to process existing claims. They're doing more detailed reviews and asking for additional documentation to ensure claims are valid. This is to prevent fraud and also to protect businesses from penalties because of bad claims pushed by promoters.

The message is loud and clear: be extremely cautious if you're considering applying for the ERC. And if you've been misled into claiming it and already received the payment, stay tuned for more guidance from the IRS this fall.

To withdraw an ERC claim, there are specific conditions you must meet, and the IRS has detailed instructions on their website for how to go about it. They've even set up a special fax line for this process. And if you're under audit or received a refund check that you haven't cashed or deposited, there are specific steps to follow.

And don't fall for the new tricks by scammers who are now offering costly upfront loans against ERC claims following the moratorium announcement. Be aware of these scams and avoid these risky loans. The IRS is continuously updating its warnings and guidance on these matters.