Imagine receiving a refund of up to $26,000 per employee by gathering information and filing a tax form. It’s an opportunity that any employer would eagerly seize. The Employee Retention Tax Credit (ERC), also known as the Employee Retention Credit, has provided much-needed financial relief to businesses grappling with the challenges imposed by the COVID-19 pandemic. This quarterly payroll tax credit allows eligible employers to offset payroll taxes and wages paid to each employee, serving as a lifeline during economic uncertainty.
The ERC is not a loan; it’s a refundable tax credit designed to help qualified businesses weather the impact of retaining employees during the pandemic. Even businesses that received Paycheck Protection Program (PPP) loans can claim the ERC. In this comprehensive guide, we will explore the crucial steps to track your ERC refund and understand the intricacies of the ERC filing process.
How Do I Track My ERC Refund?
Receiving your ERC refund is a significant milestone, but the process continues. To ensure that your refund is on its way, you must follow these steps:
Verify Delivery to the IRS. The first step is to confirm that your ERC refund request was delivered to the IRS. Since the IRS doesn’t allow electronic filing of Form 941-X (amended payroll tax return), you must mail it to the appropriate IRS service center. Using USPS-certified mail with a return receipt is advisable to track the delivery. While many assume successful delivery, it’s best to check the status online and ensure that USPS has delivered your form to the IRS.
Confirm IRS Receipt. After ensuring delivery, you must verify that the IRS has received your amended return and entered it into their system. Contact the Internal Revenue Service’s business helpline at (800) 829-4933 to confirm receipt. When calling, be prepared with your federal employer identification number (EIN) and tax return information.
Remember that the current IRS staffing shortage has resulted in extended hold times for phone inquiries. There’s no guarantee that you’ll receive all the desired information from an IRS representative, and speaking with an agent won’t expedite your ERC refund status. The IRS faces a backlog of unprocessed payroll tax returns, affecting the processing time for ERC refunds.
If the delay in receiving your Employee Retention Tax Credit is causing economic hardship for your business, consider contacting the Office of the Taxpayer Advocate, also known as the Taxpayer Advocate Service. This IRS agency specializes in helping taxpayers resolve issues that still need to be resolved through standard channels.
How Long Does It Take to Get My Employee Retention Credit Refund?
Unfortunately, this aspect is not sugarcoating: ERC refunds are experiencing significant delays. Initially, businesses were told to expect six to eight weeks of processing time. However, the average processing time has increased substantially due to the high volume of ERC refund filings and limited IRS staff to review applications. Some businesses have reported waiting anywhere from four to twelve months, sometimes even longer.
Generally, the IRS processes and approves smaller refund amounts more quickly than larger ones. Therefore, if you’re anticipating a substantial ERC refund, it may take longer to receive it.
Why Are Employee Retention Credit Refunds Taking So Long?
Several factors contribute to the prolonged processing time for ERC refunds:
High Volume of 941-X Forms
The IRS has received many Form 941-X filings, contributing to the delay in processing ERC refunds. As of August 2, 2023, the IRS reported an inventory of approximately 511,000 unprocessed Forms 941-X. Some forms can only be processed once the related Form 941s are processed.
Fraudulent Claims
To combat fraudulent ERC claims, the IRS reviews enormous ERC credit claims multiple times before issuing refunds. This additional layer of scrutiny aims to minimize and deter fraudulent claims. The process was initiated based on the Treasury Inspector General for Tax Administration (TIGTA) recommendations.
Manual Processing of Form 941-X
The IRS does not accept e-filing for Form 941-X, which requires manual processing. This manual handling contributes to the delay in ERC refund processing.
How Do I Contact the IRS About My Employee Retention Tax Credit?
If you have questions about the status of your ERC refund, you can contact the IRS helpline at (800) 829-4933. Additionally, you can reach out to the IRS’ Taxpayer Advocate Service, which assists taxpayers in resolving issues that need to be resolved through regular channels.
Exploring ERC Deadlines: Can You Still Apply for the Tax Credit?
The Employee Retention Credit (ERC) has been a lifeline for businesses navigating the economic challenges posed by the COVID-19 pandemic. While the ERC program officially ended, there is still an opportunity for eligible businesses to apply for this tax credit retroactively. This article will delve into the deadlines and provisions that allow businesses to claim the ERC even after the program’s conclusion.
ERC Application Opportunities
Businesses can still apply for the Employee Retention Tax Credit (ERTC). The fact that the ERTC program has come to an official end and businesses can no longer pay wages that qualify for the ERC credit does not impede their ability to claim the credit.
Paychex, a leading provider of payroll and HR services, has developed an ERTC Service to assist businesses in checking their eligibility and amending their tax returns to claim the ERC. This service simplifies the process and ensures eligible businesses can access the tax credit they are entitled to.
Understanding ERC Deadlines
Businesses have a window of opportunity to determine their eligibility and apply for the ERC retroactively. They have up to three years from the end of the ERC program to conduct a look back and assess whether they meet the eligibility requirements. This means that businesses have until April 15, 2024, to file amended returns for the second (Q2), third (Q3), and fourth (Q4) quarters of 2020. Additionally, they have until April 15, 2025, to file amended returns for the quarters in 2021 in which they were eligible to claim the ERC.
The specific deadlines for claiming the ERC may vary depending on the business’s circumstances. In general, most businesses could claim the credit on wages paid until September 30, 2021. However, certain businesses had until December 31, 2021, to have paid qualified wages to be eligible for the credit.
Understanding the Nature of the ERC
It’s essential to emphasize that businesses can no longer pay wages with the intent of applying for the ERC credit. The ERC is not a loan but a tax credit based on payroll taxes that employers previously remitted. As a result, businesses do not have to repay the funds they receive through the ERC. Instead, they can use the credit to offset their payroll tax liability, and any excess credit can be refunded.
The Employee Retention Credit remains a valuable opportunity for eligible businesses to access much-needed financial relief, even after the program’s official end. By understanding the ERC deadlines and requirements, businesses can retroactively apply for the credit and benefit from its support. If you believe your business is eligible for the ERC or need assistance navigating the application process, consider leveraging resources like the Paychex ERTC Service. Maximize the potential benefits of the ERC and ensure your business receives the relief it deserves.
Wrapping Up
Tracking your Employee Retention Credit refund status may seem daunting, but it’s a pursuit worth your effort. The ERC program offers valuable financial relief, even considering the delays in processing. If you still need to take advantage of the ERC refund, exploring your business’s eligibility is advisable before the opportunity to file retroactively closes.
I am committed to helping businesses navigate the complexities of the ERC program and the refund process. I understand that waiting for your ERC refund can be challenging, and I am here to provide guidance and support throughout the journey. Contact me today to learn more about your eligibility and maximize the benefits of the Employee Retention Credit for your business.
Solutions by Mike Miller, CPA 