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ERTC Enforcement and Withdrawing a Claim

The Employee Retention Tax Credit (ERTC) was introduced during the COVID-19 pandemic as a tax incentive for businesses to keep employees on their payroll. To qualify, a business must have suffered financially or experienced operational disruptions because of COVID restrictions.

Even though it has since expired, it’s still possible for eligible employers to claim the ERTC on an original or amended employment tax return for wages paid between March 13, 2020 and December 31, 2021.

IRS Cracking Down on Fraudulent ERTC Claims

The ERTC has generated a lot of interest from employers, many of whom are legitimately qualified for the credit and awaiting refunds from the Internal Revenue Service (IRS). However, the IRS is working with the U.S. Justice Department to address widespread fraud that has occurred. Companies that knowingly filed fraudulent ERTC claims face the possibility of civil or criminal enforcement actions, including IRS audits, repayment of refunds with penalties, or imprisonment.

Other ERTC claimants may have unwittingly followed bad advice from third-party solicitors or aggressive marketing scams. The IRS says that as part of its commitment to helping small businesses and others targeted by ERTC schemes, it has introduced a new process for withdrawing a claim. “We want to give these taxpayers a way out,” IRS Commissioner Danny Werfel said in October.

Procedure to Withdraw ERTC Claims

For businesses concerned about their ERTC qualifications, there is still time to withdraw ineligible claims before running afoul of the IRS. The deadline to submit a withdrawal request for claims made for 2020 tax periods is April 15, 2024. For 2021 tax periods, the deadline is April 15, 2025.

Withdrawn claims will be treated as though they were never filed, and the IRS will not impose penalties or interest. This new withdrawal option only applies to ERTC claimants who have not yet received a refund or who have not deposited a refund check they’ve already received.

To request a withdrawal, businesses must:

  1. Make a copy of the adjusted return that contains the claim to be withdrawn.
  2. Write “Withdrawn” on the left margin of the first page.
  3. Have an authorized person sign and date the right margin of the first page with the person’s name and title next to their signature.
  4. Fax the signed copy of the return using a computer or mobile device to the IRS’s ERC claim withdraw fax line at 855-738-7609.

If you are concerned about an ERTC claim you filed, S.J. Gorowitz Accounting & Tax Services can provide you with professional representation and expert counsel. Please contact us if a claim withdrawal is an option you would like to pursue.

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