Fraud amongst Employee Retention Tax Credit (ERC) claims has been a persistent issue creating problems for both the IRS and business taxpayers. There is no shortage of providers that have used aggressive marketing tactics to convince business owners to apply for this COVID-19 era incentive. These providers are generally specialty firms that focus only on Covid relief programs. Unfortunately, the information used is often inaccurate or blatantly false. These providers charge a percentage of the expected credit at the time of preparation, often requiring payment before a refund amount is issued. This has led to many being left responsible for not only re-paying the awarded amount, but also for any associated penalties and fines. The unfortunate reality is this is one of many scams used by these bad actors to convince ineligible companies to apply.
Over the last few months, the IRS has been refocusing efforts on conducting additional review of claims. Last month, the agency announced a moratorium on new claim processing through the end of the year. Today, the IRS published details on a new Withdraw Program which permits certain filers to voluntarily remove a claim. It makes it easy for those who may have improperly submitted a claim to remove it from consideration. To help clients, prospects, and others, WhippleWood has provided a summary of the key details below.
ERC Withdrawal Program Guidance
Given the recent moratorium, many companies have decided to review the submitted ERC claim to ensure its accuracy. If issues are discovered, it is possible to request a withdrawal from consideration. However, not all businesses qualify. Only those that made the original claim through an adjusted employment tax return, made the adjustment solely to claim the credit, want to withdrawal the entire claim amount, and have not received payment (or cashed/deposited a received payment) are eligible.
Request a Withdrawal
Assuming a company meets the criteria outlined above then there are simple steps which must be followed. However, the process is different depending on the specific circumstances of each company. For example, a company that filed a claim that is not under audit will take different steps that those who filed a claim but are currently under examination.
- Circumstance 1 – Claim Filed Not Currently Under Examination. These companies need to follow a simple process to request a withdrawal. The first step is to make a copy of the adjusted return with the claim that is to be withdrawn. In the left margin of the first page write Withdrawn, and on the other side write the name, title, signature, and date of the request. Fax a signed copy of the return to the special IRS tax line.
- Circumstance 2 – Claim Filed Currently Under Examination. These companies need to follow the same steps outlined above but should not submit the request to the IRS directly. Rather communicate with the assigned examiner about how to submit the request. In the event an examiner has not been assigned, respond to the audit notice with the request using the included instructions.
- Circumstance 3 – Refund Received but Check Not Cashed. These companies should follow the same steps outlined above. On the check the word void should be written in the endorsement section. Then a brief note explaining the reason for the check’s return. All documents, including the check should be mailed to the Cincinnati Refund Inquiry Unit. The IRS advises that taxpayers track their package to confirm delivery.
A company will know whether the request was accepted because the IRS will send notification via mail. An approved request is not effective until an acceptance letter is received.
The new program provides an important opportunity for Denver companies to withdrawal an ineligible claim and avoid the costly fees and penalties. If you have questions about the information outlined above or need assistance reviewing your ERTC claim, WhippleWood CPAs can help. For additional information call 303- 989-7600 or click here to contact us. We look forward to speaking with you soon.