A backlog in the IRS’s processing of Employee Retention Credit (ERC) claims has some small businesses waiting as long as 160 days to receive their retroactive credit, CPA Practice Advisor reported.
The ERC is a refundable tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or that had significant declines in gross receipts from March 13, 2020, to Dec. 31, 2021. But not all businesses are receiving their credits in a timely fashion. This is due, in part, to chronic understaffing and underfunding at the tax collection agency over the years.
Alicia Chapman, CEO of Portland, Ore.-based metal manufacturer Willamette Technical Fabricators, told a congressional hearing that her small business is eligible for an ERC worth more than $125,000. She has been waiting for more than eight months for it.
“When we’ve been able to get through to someone at the IRS, which is rare, they have informed us that processing of ERC refunds is taking up to 160 days, unless there are any delays, in which case it could take much longer,” she told the Senate Committee on Finance and Senate Committee on Small Business and Entrepreneurship. “Unfortunately no one has been able to clarify what might constitute a delay, or offered any suggestions for steps we could take to help expedite the process. With so many taxpayers, especially small businesses, hoping to take advantage of the ERC program, our accountants have told me that they have been seeing long wait and processing periods for all of their clients, and I have heard from many of our partners that this is sadly the norm. “
She added, “I cannot go a day without getting a call from a blocked number for someone promising to help me get my ERC refund faster, or offering to provide a predatory loan against it, because this has become such a pervasive problem.” The IRS recently alerted businesses and tax-exempt groups to be wary of companies and individuals promoting their eligibility for the ERC.
Last month, Sen. Kirsten Gillibrand (D-N.Y.) called on IRS Commissioner Daniel Werfel to address the backlog of ERC claims for almost one million New Yorkers. In April, Werfel, under questioning from Sen. Mark Warner (D-Va.) at a Senate Finance Committee hearing, said that his agency was processing 20,000 ERC claims per week and hoped to double that to 40,000 a week.
Adjusted or amended payroll tax returns contribute to the backlog, Michael Wronsky, a senior manager with Baker Tilly’s tax team, told CPA Practice Advisor.
“These returns are where the majority of credits have been claimed, and they must be paper filed,” he said. “The IRS was already facing limited resources even before the pandemic,” he said. “When you add to that the fact that several million tax returns were filed on paper and sent to service centers that were severely understaffed because of COVID, it’s easy to understand why the processing has been slow.”