Correction of an Improper ERC Claim

With all the scrutiny around the ERC, what do you do if a business has incorrectly taken the credit?

To correct an improper ERC claim, the first thing to do is file another Form 941-X for each quarter.  The 941-X should reflect the tax due equal to the refund (unless interest was paid to them). Refund the total amount of the refund check received, even if it is more due to interest paid by the IRS. This will reduce any interest the IRS is assessing on the taxpayer for the period in which the taxpayer has the funds.

Here is the IRS' Guidance for returning an erroneous refund:

It's an erroneous refund if you receive a refund you're not entitled to at all or for an amount more than you're entitled to.

If your refund was a paper Treasury check and hasn't been cashed:

1. Write "Void" in the endorsement section on the back of the check.
2. Submit the check immediately, but no later than 21 days, to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check.
3. Don't staple, bend, or paper clip the check.
4. Include a note stating "Return of erroneous refund check" and give a brief explanation of the reason for returning the refund check.

If your refund was a paper Treasury check and has been cashed:

1. Submit a personal check, money order, etc., immediately, but no later than 21 days, to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check. If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) (see telephone and local assistance for hours of operation) and explain to the assistor that you need information to repay a cashed refund check.
2. Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (social security number, employer identification number, or individual taxpayer identification number).
3. Include a brief explanation of the reason for returning the refund.
4. Cashing an erroneous refund check may result in interest due the IRS.

IRS mailing addresses based on the city (possibly abbreviated) located on the bottom text line in front of the words TAX REFUND on your refund check:

• ANDOVER – Internal Revenue Service, 310 Lowell Street, Andover MA 01810
• ATLANTA – Internal Revenue Service, 4800 Buford Highway, Chamblee GA 30341
• AUSTIN – Internal Revenue Service, 3651 South Interregional Highway 35, Austin TX 78741
• BRKHAVN – Internal Revenue Service, 1040 Waverly Ave, Holtsville NY 11742
• CNCNATI – Internal Revenue Service, 7940 Kentucky Drive, Florence KY 41042
• FRESNO – Internal Revenue Service, 3211 S Northpointe Dr, Fresno CA 93725
• KANS CY – Internal Revenue Service, 333 W. Pershing Road, Kansas City MO 64108-4302
• MEMPHIS – Internal Revenue Service, 5333 Getwell Road, Memphis TN 38118
• OGDEN – Internal Revenue Service, 1973 N Rulon White Blvd., Ogden UT 84201
• PHILA – Internal Revenue Service, 2970 Market St., Philadelphia PA 19104