(The Center Square) – The IRS announced an easy exit for companies worried about the accuracy of their Employee Retention Credit after a flood of improper claims.
On Thursday, the IRS detailed a special withdrawal process to help companies that filed for an Employee Retention Credit, a refundable tax credit for businesses and tax-exempt organizations that continued to pay employees amid government-imposed COVID-19 shutdowns.
This new withdrawal option allows certain employers who filed an ERC claim but have not yet received a refund to withdraw their submission and avoid future repayment, interest and penalties. Employers that submitted an ERC claim that’s still being processed can withdraw their claim and avoid the possibility of getting a refund for which they’re ineligible.
The IRS created the withdrawal option to help business owners who were pressured or misled by 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 Claims that are withdrawn will be treated as if they were never filed.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, but the withdrawal option is not a get-out-of-jail-free card. Those involved in fraud could still be prosecuted, according to the IRS.
“The IRS is committed to helping small businesses and others caught up in this onslaught of Employee Retention Credit marketing,” IRS Commissioner Danny Werfel said. “The aggressive marketing of these schemes has harmed well-meaning businesses and organizations, and some are having second thoughts about their claims. We want to give these taxpayers a way out.”
The refundable tax credit was designed for businesses that continued paying employees during the COVID-19 pandemic while their business operations were suspended due to a government order or a significant decline in revenue during the eligibility periods.
Last month, the IRS put ERC claims on hold amid a deluge of improper claims. In September, the IRS announced a moratorium on processing new ERC claims. The tax-collecting agency said it was concerned about fraud.
“The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in,” Werfel said last month. “The further we get from the pandemic, the further we see the good intentions of this important program abused.”
n July, the IRS said it was shifting its focus to scrutinize more claims, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims.
In September, when the IRS hit pause on new claims, it had received about 3.6 million claims.
Originally published by The Center Square. Republished with permission.
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