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IRS Announces Employee Retention Credit (ERC) Claim Withdrawal Process for Eligible Businesses

Hot Topics, News, Offshore Account Update

Posted in on October 31, 2023

The Internal Revenue Service (IRS) is targeting businesses (and business owners) that fraudulently claimed the Employee Retention Credit (ERC). However, the IRS also acknowledges that many business owners unknowingly submitted invalid claims due to falling for fraudulent ERC filing promotion scams. As a result, it is now offering the opportunity for eligible businesses to withdraw their ERC claims before they trigger audits and investigations. Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what business owners need to know:

What Virginia Business Owners Need to Know About ERC Claim Withdrawal

There are two critical facts Virginia business owners need to know about the IRS’ recently-announced withdrawal process for invalid ERC claims. First, not all businesses are eligible to file for withdrawal. The IRS has established strict eligibility criteria, and businesses that do not meet these criteria cannot take advantage of the withdrawal process. Instead, they will need to consider other options for avoiding IRS scrutiny.

Second, even when eligible businesses successfully file for withdrawal, this does not guarantee immunity from prosecution. The IRS is prioritizing ERC fraud enforcement, and it has made clear that businesses (and their owners) can face prosecution for willfully submitting invalid ERC claims even if they file for withdrawal. As a result, along with assessing their businesses’ eligibility, business owners must assess all other pertinent considerations as well.

Businesses that are ineligible to withdraw their ERC claims may be able to amend their returns—and pay what they owe in back taxes, interest, penalties and refund reimbursement. However, this can also raise red flags in some cases. Correcting past filing mistakes does not wipe the slate clean, and business owners suspected of willfully attempting to evade tax liability can face criminal prosecution even after they pay what they owe. When this is a concern, submitting a voluntary disclosure may be preferable to submitting an ERC claim withdrawal or an amended return.

How Can Business Owners Determine if Their ERC Claims Are Invalid?

Of course, if your business properly claimed the ERC, then you have nothing to worry about. But how can you be sure? Calculating the ERC is not easy—even the IRS acknowledges this is the case. As a result, whether you calculated the ERC yourself, relied on an accounting firm or worked with another third-party service provider, you will want to engage experienced tax counsel to assess whether your ERC claim is valid. If it is, then you can move on with confidence. If it isn’t, then you can make informed decisions about your next steps.

Request an Appointment with Virginia Tax Lawyer Kevin E. Thorn for More Information

If you need help reevaluating your business’s ERC claim or resolving an invalid ERC claim with the IRS, we encourage you to contact us promptly for more information. To request an appointment with Virginia tax lawyer Kevin E. Thorn, please call 703-752-3752 or tell us how we can reach you online today.

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