By Christopher Migliaccio, JD, Managing Director

The IRS recently announced on Thursday, October 19^th, a new program allowing employers to withdraw Employee Retention Credit (ERC) claims. This follows the IRS’ pause on the processing of new ERC claims last month. The withdrawal program allows employers who have submitted ERC claims that they now believe have been made in error to avoid potential penalties and interest on improper claims. The IRS also once again reiterated prior stern warnings about the use of ERC “mills” promoting qualification for businesses at odds with IRS eligibility guidance.

Who Can Use the Withdrawal Program?

An employer can withdraw an ERC claim under the new program if all of the following apply:

• They made the claim on an amended employment tax return (i.e., Form 941-X)
• They filed the amended return only to claim the ERC
• They want to withdraw the entire amount of the ERC claim
• The IRS has not paid the claim, or the IRS has paid the claim but the employer hasn’t cashed or deposited the refund check.

Taxpayers who are under audit may still withdraw their claims.

Taxpayers who use a group payroll company for which more than one employer is represented on a single payroll tax return, such as a PEO, will need to consult with their payroll provider.

Based on the IRS process guide, it appears that if an employer claimed the ERC for multiple quarters, they would need to rescind each quarter separately (and do not need to rescind all quarters).

Employers who made their claim on an original payroll tax return, filed an amendment with other non-ERC related changes, or wish to change the amount of ERC claimed but do not want to withdraw the entire claim can file a new amended payroll tax return.

The IRS promises further details forthcoming on a settlement program for those who have received erroneous ERC refunds and have already cashed the checks.

Takeaways

It’s important to note that the recent IRS activity around the ERC should not concern those with legitimate claims who have worked with a trusted tax professional and documented their qualification. However, if you did not work with a trusted tax professional, now is an excellent time to review your eligibility and credit calculation with a trusted tax advisor, as identifying and withdrawing an improper claim could provide significant savings in penalties and interest.

Contact Us

PKF Advisory has helped hundreds of companies across a number of industries determine their ERC qualification, calculate their credit and help them file amended payroll tax returns.

If you have questions about the employee retention credit, contact your Client Service Partner or:

Christopher Migliaccio, JD
Managing Director
ERC Services Leader
cmigliaccio@pkfadvisory.com