IRS Issues Guidance on How to Return ERC Claims in Full

  • Tax strategies
  • 10/24/2023
Boardroom reviewing financials

Key insights

  • The IRS announced a new special ERC withdrawal process for eligible taxpayers who have not yet received their refund. The IRS is aware that many taxpayers were pressured or misled by ERC marketers or promoters into filing potentially ineligible claims and that those taxpayers may be concerned about the accuracy and/or validity of their ERC claims.
  • Claims that are withdrawn are treated as if they were never filed for purposes of assessing interest and penalties. 
  • Instructions to withdraw an ERC claim should be carefully followed when submitting a withdrawal request.

Consult a qualified tax professional to assist with eligibility and documentation of ERC claims.

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The IRS issued promised guidance on how to return ERC claims in full

The IRS issued multiple warnings, a generic legal advice memorandum, and the “dirty dozen” article warning taxpayers against aggressive schemes for claiming COVID-related relief with the employee retention credit program.

On September 14, 2023, it announced a moratorium on processing new refund claims through the end of the year to get a better handle on fraudulent claims and to slow the process to identify claims that may be less than reputable. On October 19, it issued instructions on how to return improper ERC claims in full.

What does this mean for taxpayers who choose to return payments?

  • The withdrawal option was created to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims.
  • Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.
  • BE ADVISED: The IRS guidance does warn that those who willfully filed a fraudulent claim, or those who assisted or conspired in such conduct, should be aware that withdrawing a fraudulent claim will not exempt them from potential criminal investigation and prosecution.

Employers can use the ERC claim withdrawal process if all of the following apply:

  • They made the claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X).
  • 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 the claim, but they haven’t cashed or deposited the refund check.

Taxpayers who are not eligible to use the withdrawal process can reduce or eliminate their ERC claim by filing an amended return. Instructions to withdraw an ERC claim are available at and should be carefully followed when submitting a withdrawal request.

How we can help

Contact your CLA tax professional if you are an employer considering whether you may be eligible for the employee retention credit. We can assist in determining eligibility and collecting appropriate documentation to support the claims.

If you are concerned about having filed an improper claim, CLA is here to educate you and equip you with the information you need to work with your original provider to return the funds.

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