Recently, the IRS halted processing of claims for the Employee Retention Credit (ERC), due to a high volume of fraudulent claims. The moratorium is through at least the end of 2023. ERC claims that were already filed are now subject to longer processing, including heightened scrutiny to weed out fraud.

Now the IRS is creating a path for businesses that are concerned they may be victims of aggressive ERC marketing schemes. Eligible businesses can opt to withdraw unprocessed claims that they now believe may be invalid. Among other things, to be eligible, the business must have made the claim on an adjusted employment return that included no other adjustments and must want to withdraw the entire amount of the ERC claim.

Withdrawing a claim can allow the business to avoid receiving a refund for which it's ineligible (and that would have to be repaid) as well as interest and penalties. Businesses that aren't eligible to use the withdrawal process may be able to reduce or eliminate their ERC claim by filing an amended return.