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What to know as IRS kicks off withdrawal option for pandemic-era small business tax credit

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“This is a game-changer,” said Eric Hylton, national director of compliance for Alliantgroup, a firm that has been reviewing ERC claims for other tax professionals.

“I’m actually shocked at a number of the horror stories we have been seeing,” said Hylton, who’s a former IRS commissioner for the agency’s small business and self-employed division.

It’s a ‘mulligan moment’

If you’ve got neither received an ERC refund nor cashed your ERC refund check, there’s still time to withdraw your filing, based on the agency. You may qualify in case you meet three conditions: you made the claim on an adjusted employment tax return, only modified your filing for the ERC and wish to withdraw the whole claim.

You can find the entire details on eligibility and learn how to withdraw your claim at IRS.gov/withdrawmyERC.

“It’s a mulligan moment,” said Dean Zerbe, national managing director at Alliantgroup. He said the withdrawal option is a possibility to repair mistakes before the IRS catches them. 

Currently, there’s an IRS backlog of unprocessed ERC filings. As of Oct. 11, the agency estimated a backlog of 849,000 Forms 941-X, which incorporates ERC claims.   

Small businesses should take the chance to “sharpen their pencil” and review their pending ERC filings with a tax skilled, Zerbe said, pointing to the strict eligibility requirements. “Business owners cannot just whistle by the graveyard.”

“Think long and hard about what you are doing here since the IRS goes to be throughout this,” he added.

How to handle processed ERC claims

If the IRS already processed your ERC claim and also you cashed the refund check, Hylton still recommends reviewing the filing with a tax skilled to see if an amendment is needed.

For example, it’s possible you simply qualified to receive the ERC for 2 quarters but claimed the credit for 4 or six quarters, he said. Whether you might want to make a minor change or major correction, it’s vital to “address the problem as soon as possible,” Hylton said. “You need to be ahead of them.”

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