Withdraw 941-X Employee Retention Credit Claim from the IRS

What is the Employee Retention Credit(ERC)?

The Employee Retention Credit (ERC) is a refundable tax credit available to certain eligible businesses and tax-exempt organizations that had employees and were impacted by the COVID-19 pandemic. The Employee Retention Credit (ERC) was introduced in 2020 as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Typically, the credit is claimed by filing a refund claim for the relevant quarter. Businesses that meet the following criteria were eligible to claim the ERC:

• Businesses that were required to shut down due to government orders.
• Businesses that experienced a significant decline in gross receipts during specific eligibility periods in 2020 or 2021.
• Businesses that qualified as a recovery startup for the third or fourth quarters of 2021.

What is an IRS ERC Withdrawal?

The IRS ERC withdrawal is for employers who have not received their Employee Retention Credit (ERC) yet or have received a check but haven't cashed or deposited it. If you request to withdraw your claim, you can ask the IRS not to process the entire adjusted employment tax return (Form 941-X, 943-X, 944-X, or CT-1X ) for the tax period that included your ERC claim. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.

If you already received the ERC, you can't use the withdrawal process, but you may be eligible for the IRS's Voluntary Disclosure Program.

Which employers qualify to withdraw their ERC claim?

When withdrawing an ERC claim that was already submitted to the IRS, employers must meet all the following requirements:

• The claim was made using an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X).
• The adjusted return was filed only to claim the ERC, and no other adjustments were made.
• They plan to withdraw the entire amount of their ERC claim.
• The IRS hasn't paid their claim yet, or the IRS has issued employers a refund check, but they haven't cashed or deposited it.

Taxpayers who are ineligible for the withdrawal process can reduce or eliminate their ERC claim by filing an amended return.

Note: If a taxpayer willfully filed an Employee Retention Credit (ERC) Claim or if assisted or conspired in such conduct, it is important to note that withdrawing the claim does not exempt them from criminal investigation and prosecution.

What about employers that aren’t eligible to withdraw ERC claims?

Suppose an employer is not eligible to withdraw an Employee Retention Credit (ERC) claim due to not meeting one of the required criteria or having already received the refund check. In that case, they can still adjust, reduce, or eliminate the ERC amount by submitting a Form 941-X. For more information, check out the "Correcting an ERC Claim Amending a Return" section of the frequently asked questions about the Employee Retention Credit (ERC).

What is the process for withdrawing an ERC Claim?

Businesses can withdraw their claims for the Employee Retention Credit (ERC) with the IRS. If you've submitted a claim using an adjusted employment tax return (such as Form 941-X, 943-X, 944-X, or CT-1X) for the ERC and later find that it doesn't meet the eligibility requirements, you can withdraw it through the IRS process.

The process for withdrawing an ERC claim varies based on the employer’s situation. The IRS provides the following scenarios:

• Your business has not received a refund, and the IRS has not informed you that your claim is under audit.
• Your business has not received a refund, but the IRS has notified you that your claim is under audit.
• Your business has received a refund check but hasn’t cashed or deposited it.

How do you Withdraw an ERC claim with TaxBandits?

To withdraw an Employee Retention Credit (ERC) claim, you need to request an ERC withdrawal with the already filed 941-X return. As an IRS-authorized e-file service provider, TaxBandits supports you in withdrawing ERC claims. Follow these simple steps to withdraw your ERC claim with TaxBandits:

• Step 1 : Log Into your TaxBandits account.
• Step 2 : Go to the 94x Dashboard and select ‘Click Here’ from the ‘Withdraw ERC Claim’ popup box.
• Step 3 : Choose either Amendment Form 941-X or Original Form 941 if you have claimed Employee Retention Credit (ERC) on either form.
• Step 4 : Select the appropriate category based on your ERC Claim process
• Step 5 : Choose the 941-X return you filed with TaxBandits to withdraw the ERC Claim.
• Step 6 : Click ‘Download Claim Withdrawal request’ and provide the signatory name and title. Then, fax the signed copy to the IRS.

Article Sources:

• https://www.irs.gov/pub/irs-pdf/f941.pdf
• https://www.irs.gov/pub/irs-pdf/i941.pdf