IRS is offering a painless way to back out if you made a bad claim for employee retention credit (ERC).
This temporary credit was introduced as a way to make it less costly for businesses to continue paying employees while closed down or operating at limited capacity due to the covid pandemic. Scam artists jumped all over it, encouraging businesses to claim the credit without regard to whether they meet all the requirements. (Fairmark received some of these promotions, even though we don’t have any employees.)
Facing a deluge of faulty claims, the IRS increased its scrutiny of filings and warned taxpayers about scams. Then the agency announced a moratorium on processing these claims.
Not all of the businesses that filed bad claims were intentionally cheating. Fast-talking scammers may have persuaded them that the claims were legit. These businesses may end up being the ultimate victims of the scam, as the IRS requires them to repay the credits with interest and penalties.
Recognizing this reality, the IRS is offering a relatively simple way to withdraw a bad claim for ERC. Not everyone will qualify. For example, you can’t undo the damage if you’ve already deposited or cashed a check the IRS paid on the claim. If you think you may want to withdraw an ERC claim, though, visit the IRS page describing a special procedure they’ve set up for this purpose.
IRS is not encouraging withdrawal of legitimate filings. It is offering a way to avoid negative consequences of making a bad claim.