In a previous blog post, we discussed the IRS’s recent moratorium on new Employee Retention Tax Credit (ERTC) claims. The agency recently followed up on its moratorium announcement by releasing IR-2023-193, which details a new process for withdrawing ERTC claims.
If you’re struggling to understand this announcement, Engineered Tax Services (ETS) is here to help. We believe that understanding ERTC changes is critical to your business strategy going forward, so we’ve taken it upon ourselves to sift through the legalese.
Keep reading for a detailed breakdown of IR-2023-193 as well as some exclusive insights from our experts in Washington. Tax laws might be shifting, but you don't have to navigate this alone.
Why the ERTC Is Crucial for Businesses
The Employee Retention Tax Credit (ERTC) has been a financial lifesaver for businesses affected by the economic downturn caused by COVID-19. It offers valuable tax credits for employers who kept their staff employed, acting as a stabilizer for both businesses and the broader economy. As of mid-September, the IRS reported a staggering 3.6 million ERTC claims filed, highlighting the program's vast reach and its role in saving jobs and supporting communities.
Breaking Down IRS Announcement IR-2023-193
Introducing ERTC Withdrawal
With ERTC claims surging, the IRS aims to streamline its processes and protect businesses. IR-2023-193 implements a withdrawal process to prevent issues from incorrect or fraudulent filings that could financially endanger companies.
Why the Withdrawal Process Matters
The withdrawal process is primarily intended to safeguard businesses. The IRS understands errors happen accidentally. You don't want a simple mistake to trigger penalties or instability.
Who is Eligible to Withdraw?
You can initiate a withdrawal process if:
- You made the ERTC claim on an adjusted employment tax return (Forms 941-X, 943-X, 944-X, CT-1X).
- Your adjusted return was filed solely to claim the ERTC, and you made no other adjustments.
- You wish to withdraw the entire amount of your ERTC claim.
- The IRS has either not paid your claim, or you have not cashed or deposited the refund check.
How to Withdraw an ERTC Claim
The IRS outlined straightforward steps for withdrawing a claim:
- Submit a written request to the IRS
- Include documentation supporting the withdrawal
- Await IRS confirmation that the claim is officially withdrawn
Additional information including mailing guidelines and required documentation may be found in the new IRS fact sheet.
Impacts of Withdrawing
The good news is that withdrawn claims don't incur penalties unless fraudulent. This provides some relief given the complexities of the tax landscape. However, fraudulent claims still face action.
Addressing Processing Delays
Many experts speculated that the IRS stopped processing all ERTC claims when they released the September 14th moratorium, but the good news is that this was a temporary measure. Our experts in Washington have confirmed that this brief pause occurred to give the agency time to finalize new compliance review mechanisms and the new withdrawal process.
The IRS will now resume processing those ERTC claims that were received prior to September 14th, 2023. However, claims submitted after this cutoff date will not be processed until after the new year at the earliest.
What This Means for Your Business
Tax policy changes always have implications, and IR-2023-193 is no different. Small businesses and employers need to be extra diligent when filing ERTC claims. Inaccuracies can spur delays due to the new withdrawal process and reviews. The IRS will scrutinize every detail, so even unintentional errors could jeopardize your claim.
Recommended Next Steps
Consult a Tax Expert
Given the complex landscape and increased IRS scrutiny, consulting a tax pro is essential for specialized programs like ERTC. Experts well-versed in the nuances of tax codes and updates can provide invaluable guidance.
Review Existing or Planned Claims
Due diligence is the name of the game. If you've already filed or are planning to file an ERTC claim, now is the time to re-evaluate. Double-check the accuracy of your data, the eligibility of your employees and the calculations in your forms. An ounce of prevention is worth a pound of cure, especially when facing the prospect of delays—or worse, penalties.
By staying agile amid IRS updates and taking a strategic approach, you can position your business for both immediate and long-term success with the ERTC. For expert guidance on navigating this critical relief program, we invite you to reach out to Engineered Tax Services today. Let us support you in charting the optimal course through the changing ERTC landscape.