IRS Announces Program To Protect Businesses From ERC Fraud

As Connecting the Dots reported in September, the U.S. Internal Revenue Service (IRS) put an immediate stop to processing employers’ paperwork for the Employee Retention Credit (ERC), a key tax benefit that Congress approved during the COVID-19 pandemic to entice companies to keep employees on the payrolls.

IRS Commissioner Danny Werfel had ordered the moratorium to protect businesses from predatory tax providers who were falsely claiming companies were eligible for the program, putting those businesses in legal jeopardy and at risk of being fined.

Following up on September’s announcement, last week the IRS announced the details of a special withdrawal process to help companies who filed an ERC claim, but are concerned about their accuracy.

The IRS said this new withdrawal option allows certain employers that filed an ERC claim, but have not yet received a refund, to withdraw their submission and avoid future repayment, interest, and penalties. The IRS created the withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims. Claims that are withdrawn will be treated as if they were never filed, and the IRS will not impose penalties or interest, the agency said.

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