On Thursday, the IRS introduced certain criteria that, if satisfied, allow a small business to withdraw a prior claim for the Employee Retention Tax Credit (ERC). Certain businesses paying wages to employees during the COVID-19 pandemic and experiencing a "significant decline in gross receipts" were eligible to apply for the ERC.
In September, however, the IRS stopped processing ERC claim applications in light of a "surge of questionable claims."
Under the new withdrawal process, a small business can ask the IRS to not process its entire adjusted employment tax return for the tax period including the ERC claim if all of the following criteria are met:
- The business made the claim on an adjusted employment tax return (which includes Forms 941-X, 943-X, 944-X, CT-1X).
- The adjusted employment tax return was filed only to claim the ERC, and no other adjustments were made.
- The business wants to withdraw the entire amount of its ERC claim.
- The IRS has not paid the claim; or, if it has, the business has not cashed or deposited the refund check.
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