IRS Announces Special Withdrawal Process for Employee Retention Credit Claims
New IRS withdrawal process for Employee Retention Credit claims a crucial move to safeguard small businesses and organizations from scams.
In a bid to protect small businesses and organizations from scams and erroneous claims, the Internal Revenue Service (IRS) recently unveiled a special withdrawal process for those who have filed an Employee Retention Credit (ERC) claim but are concerned about its accuracy. This new withdrawal option is aimed at helping employers avoid future repayment, interest, and penalties. Let’s delve into the details of this IRS initiative.
Understanding the Employee Retention Credit:
The Employee Retention Credit, also known as the Employee Retention Tax Credit (ERTC), is a refundable tax credit designed to assist businesses that continued paying employees during the COVID-19 pandemic while their operations were either fully or partially suspended due to government orders or experienced a significant decline in gross receipts during specified periods.
The Need for a Withdrawal Option:
The IRS introduced this withdrawal option to address concerns from small business owners and others who were potentially misled or pressured by ERC marketers into filing ineligible claims. Such claims, when withdrawn, will be treated as if they were never filed, and the IRS will not impose penalties or interest. However, it’s crucial to understand that this option is not a blanket amnesty. Individuals who knowingly filed fraudulent claims may still be subject to criminal investigation and prosecution.
Key Features of the Withdrawal Process:
Employers can use the ERC claim withdrawal if all the following apply:
- They made the claim on an adjusted employment return.
- They filed the adjusted return only to claim the ERC, and they made no other adjustments.
- They want to withdraw the entire amount of their ERC claim.
- The IRS has not paid their claim, or the IRS has paid them, but they have not cashed or deposited the refund check.
Taxpayers who are not eligible for the withdrawal process can reduce or eliminate their ERC claim by following other guidance provided by the IRS.
The Moratorium on Processing New Claims:
The IRS also declared a moratorium on processing new ERC claims starting on September 14, 2023. This moratorium is expected to continue until at least the end of the year. The decision to implement the moratorium was driven by a surge in ineligible ERC claims. While payments for claims submitted before September 14, 2023 will continue, they may face longer processing times due to enhanced compliance reviews. The IRS aims to protect against fraud and ensure the legitimacy of claims.
The IRS’s special withdrawal process for Employee Retention Credit claims is a proactive measure to protect honest businesses and organizations from potential penalties and interest stemming from ineligible claims. Employers should carefully review the withdrawal option, consult trusted tax professionals, and stay vigilant against scams in this complex tax credit landscape.
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