The IRS’s October 2023 withdrawal option addressed a practical problem created by aggressive marketing: employers with questionable Employee Retention Credit claims could seek to stop a pending refund before it became a repayment, penalty or interest issue. The agency said withdrawn claims would be treated as though they had never been filed, and it would not impose penalties or interest on those withdrawals. The relief was conditional, not a general amnesty; the IRS explicitly said withdrawal would not shield people who willfully filed fraudulent claims from possible criminal investigation or prosecution. [story-s1]

The eligibility test was specific. An employer had to have claimed the credit on an adjusted employment return, filed that return only to claim the ERC without other adjustments, seek withdrawal of the full claim, and either have no refund payment or have an uncashed, undeposited refund check. Employers who did not meet those conditions could instead correct a claim by filing an amended return. The instructions also varied by filing situation: a business whose payroll provider submitted the claim was told to consult that provider, while self-filers could use the IRS’s special fax process if the claim had not been paid and was not under audit. Employers already under audit were directed to contact the assigned examiner or respond to the audit notice. [story-s1]

The announcement landed amid a broader enforcement shift. The IRS announcement reported about 3.6 million ERC claims over the program’s life. After imposing a moratorium on processing new claims on Sept. 14, the agency said it would scrutinize existing submissions more closely; its stated standard processing goal for existing claims moved from 90 days to 180 days, with longer waits possible for further review or audit. For small businesses, the notice’s key operational point was therefore not simply that withdrawal existed, but that it depended on the claim’s status, filing history and refund handling. The IRS urged employers to review the detailed rules with a trusted tax professional rather than a credit marketer. [story-s1]

Source documents

  1. IRS announces withdrawal process for Employee Retention Credit claims; special initiative aimed at helping businesses concerned about an ineligible claim amid aggressive marketing, scamshttps://www.irs.gov/newsroom/irs-announces-withdrawal-process-for-employee-retention-credit-claims-special-initiative-aimed-at-helping-businesses-concerned-about-an-ineligible-claim-amid-aggressive-marketing-scams