During the uncertain times of the COVID-19 lockdown era, small and mid-size businesses sought whatever aid was available. Loans, grants, and temporary tax benefits were a boon to business owners that enabled them to stay operational and retain employees.
The Employee Retention Credit (ERC) provided much-needed relief to employers across America. However, the hasty introduction of COVID-19 aid packages resulted in very little oversight of these programs and tax credits. Fraudulent and erroneous ERC claims created massive backlogs at the IRS, which the agency is still reviewing as of August 2024.
Here's what you need to know about your ERC refund status and why your claim may still be subject to incredibly delayed processing.
Eligible ERC claimants who filed before the September 2023 moratorium can expect to receive their payments in the summer of 2024. The IRS is still identifying ERC claims that have a high risk of errors or fraud, which they've determined is 10-20%. Since pandemic-era protections have ended and the IRS is applying a higher degree of scrutiny in 2024, ERC refund delays are to be expected.
The IRS is working on the oldest claims first. If you submitted your ERC claim during the moratorium period, which started on September 14, 2023, and is still in effect at the time of writing, they will not review it until further notice.
Over 1.4 million ERC claims remain unprocessed. Even with increased funding and hiring more agents and officers throughout 2024, the IRS will have ERC processing delays well into 2025. The agency estimates that another 17,000 new ERC claims are entered into the system every week despite there being a moratorium on processing since September 2023. This sheer volume alone is why ERC refund delays are to be expected.
The IRS has initiated 450 criminal cases over $7 billion in ERC fraud. While this is not even 1% of the unprocessed ERC claims that may be legitimate, the haste behind the credit's rollout and the urgent need for relief resulted in business owners claiming the credit in error. Eligible taxpayers who made mistakes on their ERC claims will experience ERC refund delays, as it takes time to process and address any mistakes.
As with any other tax matter, processing delays are inevitable if the IRS requests additional documentation from you. Even if they send their request relatively fast, you will need time to find and remit these documents and then resume waiting.
The most direct way to get your ERC refund status is to contact the IRS directly over the phone or visit your local IRS office. You can contact the dedicated business helpline at 800-829-4933. Make sure that you have your employer identification number handy along with the quarters you filed amended returns for, an estimate of when you mailed your 941-X forms, and how much you expect your ERC refund to be.
The IRS also has free online tools you can use to check the status of various tax documents and refunds. While they do not track the ERC specifically, they may be helpful depending on your business entity type and situation. The Where's My Amended Return? tool tracks Form 1040X for amended individual tax returns, although it does not cover amended business tax returns or payroll tax returns like 941-X.
The Where's My Refund? tool also tracks individual tax refunds. While it is not designed specifically for the ERC, some taxpayers with pass-through entities were able to find out that their ERC refund was on the way.
Unfortunately, due to the colossal backlog of ERC claims and high incidences of errors, a long wait for ERC refunds is simply the reality of the situation.
However, if you were fairly early in processing your claim and amending the relevant tax forms but you still haven't received any IRS correspondence or your refund, you should go through your records to get your filing dates and call the IRS business helpline. It is the most direct way to find out from an agent if there are any status updates on your ERC refund and if any factors beyond the high volume are causing the long wait.
If you realize that documents were missing or mistakes were made in your original ERC claim, addressing these errors will shorten processing delays.
If you were relying on your ERC refund to expand operations or get through a rough patch in an increasingly uncertain economy, you may need to explore other avenues.
ERC refund delays are inevitable well into 2025. Even with thousands of newly minted agents thanks to the 2024 funding boost, the IRS simply doesn't have enough business taxation specialists on staff to process the 1.4 million backlogged ERC claims before 2024 ends. Since it's uncertain when you will receive your ERC refund, maintaining a positive cash flow through other means should be your top priority.
Finding new revenue sources and pivoting to untapped customer bases may be a necessary short-term strategy. Negotiate with vendors and creditors to get better rates if you're expecting constricted cash flow for several more months.
The ERC provided much-needed aid during one of the most uncertain chapters in recent history. However, the fast rollout resulted in vast amounts of errors and even criminal fraud charges, which unfortunately punished eligible taxpayers who are still waiting for their ERC refunds. You can get your ERC refund status by contacting the IRS directly, but don't be surprised if you're still waiting in 2025. You can stay informed of your refund status while pursuing other means to keep cash flows positive.
If you're experiencing delays with your ERC refund or need assistance navigating the process, contact Exact Payroll today. Our experts are here to help you manage your application and ensure you get the refund you deserve. Get in touch now for a free consultation!