Steps For Withdrawing An Employee Retention Credit Claim

Summary

The transcript covers a podcast by Ralph Estep Jr. providing guidance on steps for small businesses to withdraw erroneous COVID-19 Employee Retention Credit (ERC) claims if they do not actually qualify. It advises reviewing eligibility criteria, gathering documentation submitted originally, clearly explaining reasons for withdrawal to the IRS, contacting a tax professional for assistance, submitting an amended form 941-X, and maintaining records in case of audit.

Chapters

Introducing Podcast and ERC Background

The host Ralph Estep Jr. introduces the podcast and provides background on the Employee Retention Credit program created during COVID-19 to help businesses retain employees.

Outline of Steps for Withdrawing ERC Claims

The key steps covered to properly withdraw an invalid ERC claim include: reviewing eligibility criteria, gathering original documentation, explaining reasons to the IRS, getting tax professional advice, submitting an amended 941-X form, and keeping copies of all records.

Warnings of ERC Scams and Need for Careful Review

The IRS warnings are noted regarding proliferation of questionable third parties filing ERC claims, emphasizing needs for businesses to carefully validate eligibility with a tax professional before proceeding.

Closing Thoughts and Additional Resources

In closing, the host summarizes the discussion and invites listeners to visit the podcast website for more info, leave reviews, submit questions, and share the episode.

Action Items

1. No explicit action item identified.

Welcome to the Ask Ralph Podcast, where listening to an experienced accounting professional can help you make sense of confusing questions, current headlines, and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting, Ralph makes the complex simple by sharing his real-world knowledge with all things financial.

Now here's your host, Ralph Estep Jr. Welcome back to another episode of the Ask Ralph Show. I'm your host, Ralph Estep Jr. And today we're going to discuss an important topic, and that is the steps for withdrawing an employee retention credit claim.

These were things that were all over the news just in the past year or so, where you could get up to $26,000 per employee and free money from the IRS. Well, a lot of times you didn't qualify for those.

So we want to talk today about how can you withdraw that claim. And if you already got the money, what do you do about getting that back to the IRS to avoid what I see are some huge penalties on the way.

So stay tuned. We're going to get right to it here in just a moment. Ask Ralph will be right back. Are you tired of spending countless hours trying to navigate the complex world of accounting, taxes and financial management?

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So let's get right into it. The Employee Retention Credit, or ERC, as you've heard it called, was introduced as part of the COVID-19 relief measures to help businesses retain their employees during these challenging times.

However, there may be instances where a business needs to withdraw or amend their ERC claims. So let's dive into that. But let me start with a little background. So Congress and the president signed this bill that created this Employee Retention Credit.

And if you qualified for it, that's great, fantastic. I hope it worked out for you. But then all of a sudden, we started to see a proliferation of many people running businesses trying to get people to get these ERC credits.

You probably saw them yourself. And I would have some clients that had called me or set up appointments, and I looked at their particular situation. They really didn't qualify for it, but somehow some of these, what I'll call scam houses of people doing these ERCs was able to get them money or at least get the credit going.

So today I wanna spend some time talking about how to withdraw that, because I really think this is going to be a huge issue as the IRS reviews these and starts to crack down on this. So let's dive into the steps involved.

Number one. You need to review the eligible criteria. What was the eligibility? So before proceeding with withdrawing an ERC claim, it's crucial to review the eligibility criteria outlined by the IRS.

Ensure that your business meets all requirements and qualifies for this credit. Now, this is an area the IRS has issued numerous warnings like, I've never seen it like this with the IRS, like big red flashing lights.

Be cautious. Make sure that you're not being taken into getting a claim that you don't qualify for. So the IRS has really put out a great deal of information on how to prevent this from becoming an issue.

So that's step number one, determine are you eligible? If you're eligible, then don't withdraw it. I'm cool with that. But if you're not eligible, then let's move on to step number two.

And that's gathered documentation. And what you're going to do there is collect all relevant documentation related to your initial ERC claim. This includes records of eligible wages paid during the qualifying period and any supporting documents were submitted with your original claim.  This is one of the things the IRS has talked about, you know If you've used one of these third parties to put this together, they should really have given you all the information necessary to justify this claim.  When I've looked at a few of them for people that are coming to see me and pay for a consultation, we sat down and went over it the information they got from the third party. While it was good, they gave them the reports they need to file to get the money It didn't do a good job of documenting because they qualified for it. I can understand why the third party did that because you're not Required to submit, the proof when you file these. In this case is a file and amended 941 reports but if the IRS ever questions you're going to need that information. So, if you've gotten past the eligibility and said oh, we're not eligible, then you moved on to you gathered your information number three is determine the reason for withdrawal You know, you need to identify why you need to withdraw or amend your ERC claim Some common reasons may include errors in the calculations Changes in eligibility status due to updated guidance from the IRS or discovering that you no longer meet certain criteria Yeah, you may have to look and see, you know Are there some changes that the IRS has already put into place that would make it so that you don't qualify for this?

Number four is contact your tax professional Reach out to a qualified tax professional who can guide you through the process and provide expert advice tailored specifically to your situation. Now once you've done that the next step is going to submit amended form 941 X. This was the form that you used to get the ERC credit in the first place. You've already filed if you've already filed for the employer 941 employers quarterly federal tax return claiming the ERC and need to make changes or withdraw it entirely complete the form 941 X. This is the amended claim this form allows you to correct errors on the previously filed 941 forms now as part of that filing. Thing number six, when you look to included explanation when submitting form 941X provide a clear and detailed explanation of why you are withdrawing or amending your ERC claim.

This will help the IRS understand the situation and process your request efficiently. If you were taken into belief that you qualified for this claim, and now you figured it out that you really don't, the explanation could be as simple as, I relied on this third party who told me I qualified for this because of something that happened in the market or overall economic downturn, which was used by a lot of these scammers to get people to take,  advantage of this claim. Number seven, keep the records.

You want to maintain copies of all documents submitted to the IRS, including form 941X and any other supporting documentation. These records will be essential for future reference or in case of an audit.

Now look, it's important to note that withdrawing or amending an ERC claim should be done with caution and in compliance with IRIS guidelines. Seeking professional advice from experts like Saggio Management Group or somebody else. I will go back to the person who filed it and tell them that you don't believe that they qualify for it anymore.

The problem is a lot of times they charge you 20% of whatever that claim was to get that money. So good luck trying to get that money back. But you need to find somebody who specializes in tax-winning compliance and help you ensure that you navigate this process smoothly.

Remember, accuracy and transparency are the key when dealing with tax-related matters. Well, that wraps up today's episode of the aircraft show. I hope this discussion provided valuable insights into the steps involved in withdrawing an employee retention credit claim.

And my friends, listen, if you've got one of these ERC claims, go back and look at it. See if it makes sense. Send it to somebody like myself. Pay for a consultation and sit down with somebody who is not in the game of trying to make a buck on filing these claims for you.

But sometimes we're going to look at it with an objective view. As always, if you have any questions or topics you'd like me to cover in a future episode, please feel free to reach out. You know, go to our website, our podcast website, as I mentioned before, is www.AskRalphPodcast.com.

You can leave us a review. You also can hit the little microphone icon and you can actually leave us a voicemail if there's a topic you want to discuss. But most of all, and this is really important, share this episode with friends or colleagues or somebody that will find value in this.

Until next time, stay financially savvy. Thank you for joining us on the Ask Ralph Podcast. And with a simple click to subscribe, we'll invite you back to our next episode. And remember, financial issues don't have to be complicated.

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