The Internal Revenue Service (IRS) posted new information on its website October 24 on how employers can withdraw their employee retention credit (ERC) claim. An employer may be interested in taking this step if they were pressured into filing an Employee Retention Credit (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 Only certain claims can be withdrawn, primarily those that the IRS has not yet processed, or in cases in which the employer may have received a refund check but has not cashed or deposited it yet.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 an ineligible claim is that it will be treated as though it were never filed, so penalties and interest will not be assessed. The IRS warns that fraudulent claims that are withdrawn will still be prosecuted.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.

Organizations that already received their ERC refund and now believe they were misled or were ineligible based upon the new IRS guidance can look forward to IRS instructions on how those funds can be returned (hopefully, without penalty/interest).

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.