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IRS releases details on how to withdraw ERC claims

Alice Gilman
Alice Gilman
October 26, 2023

The IRS has kept its promise to provide relief to employers that filed Forms 941-X to claim the pandemic-era employee retention credit for which they aren’t eligible. The guidance is aimed at employers with claims pending as of Sept. 14, the day the IRS imposed a moratorium on processing Forms 941-X on which the credit is claimed, but who haven’t yet received their ERCs.

Big break: The IRS will treat withdrawn claims as if they were never filed, so no penalties or interest will be levied.

Big exception: Employers that fraudulently filed for the credit get no breaks. Worse: They may face criminal prosecution.

The IRS has added more FAQs on this process. The IRS will announce another relief program later this year.

Who can ask to withdraw an ERC claim

You qualify to withdraw your ERC claim if all of the following criteria are met:

FLSA Compliance D
  • You made the claim on Forms 941-X.
  • You filed the 941-X only to claim the ERC, with no other adjustments.
  • You want to withdraw the entire ERC claim (if you filed 941-Xs for more than one quarter, you must withdraw your claim quarter-by-quarter).
  • The IRS hasn’t paid its claim or has paid it but you haven’t cashed or deposited the refund check.

Who can’t ask to withdraw an ERC claim

You can’t use the withdrawal process if any of the following apply:

  • You claimed the ERC on Form 941.
  • You want to withdraw only a portion of your claim (i.e., for a particular calendar quarter).
  • Your 941-X reports items not on your original 941, in addition to the ERC claim.
  • You need to make other corrections to your original 941.
  • You cashed or deposited your ERC refund check.
  • You received a notice or letter from the IRS disallowing the entire amount of your ERC.
  • You already received a bill or notice of demand in connection with your ERC claim. You need to pay the amount due or contact the IRS using the contact information on the notice for payment options or collection alternatives.

How to withdraw an ERC claim

How to withdraw your ERC claim depends on how far along the IRS got in processing your 941-X and whether your third-party payroll provider submitted it for you. If your payroll provider was involved, the IRS advises you talk to them.

If you haven’t received a refund and haven’t been notified that your claim is under audit:

  • Make a copy of the 941-X with the claim you wish to withdraw.
  • In the left margin of the first page, write “Withdrawn.”
  • In the right margin of the first page, have an authorized person sign and date. Also, write their name and title next to their signature. Point your browser here for a marked-up 941-X.
  • Fax the signed copy of your return to the IRS’s ERC claim withdrawal fax line at 855-738-7609. This is your withdrawal request. Keep your copy with your tax records. If you can’t fax, mail your return to the IRS at the address in the 941-X instructions.

If you haven’t received a refund and you’ve been notified that your claim is under audit, complete your 941-X as instructed in Step 1, but don’t fax anything. Instead:

  • If you’ve been assigned an auditor, communicate with them about how to fax or mail your withdrawal request directly to them.
  • If you haven’t been assigned an auditor, respond to your audit notice with your withdrawal request, using the instructions in the notice for responding.

If you received a refund check but haven’t cashed or deposited it, complete your 941-X as instructed in Step 1, but don’t fax anything. Instead:

  • Write “Void” in the endorsement section on the back of the refund check.
  • Include a note entitled “ERC Withdrawal” and briefly explain the reason for returning the refund check.
  • Make copies for your tax records of the front and back of the voided check, your explanatory notes, and the signed and dated withdrawal request page.
  • Don’t staple, bend, or paper clip the voided check; include it with your claim withdrawal request and mail it to the IRS at Cincinnati Refund Inquiry Unit, PO Box 145500, Mail Stop 536G, Cincinnati, OH 45250. Smart idea: Track your package to confirm delivery.

And now you wait

The IRS will send you a letter informing you whether your withdrawal request was accepted or rejected. Your approved request isn’t effective until you receive your acceptance letter.

One final task: You will need to file Form 1120-X to claim an increased salary deduction.

Options if you can’t withdraw

If you’re ineligible to withdraw your 941-X—you claimed it on a 941 or you need to make other corrections to the 941 on which you claimed the ERC, for example—you’re not out of luck. You can file a 941-X with the correct amount of the ERC and any other corrections for that calendar quarter.

Mail this 941-X to the IRS using the address in the 941-X instructions.

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