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August 2023 ERC Claims Update on IRS Backlog of Unprocessed 941-X Forms
On Jul 27, 2023 The Ways and Means Committee held an Oversight Sub Hearing on the Employee Retention Tax Credit (ERC). During the hearing, members of Congress and witnesses discussed ongoing issues, including the ERC backlog, delays in processing, ambiguous guidelines, and fraud allegations.
Just two days earlier,
IRS Commissioner Danny Werfel assured tax professionals in Atlanta at a special roundtable session that the IRS had successfully cleared the backlog of valid ERC claims. Committee Chairman Jason Smith, however, raised concerns during the hearing, noting that
nearly half a million forms still remained to be processed according to the IRS website.
The Internal Revenue Service (IRS) reported that there are still
506,000 unprocessed Form 941-Xs (Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund) as of July 26, 2023. Many businesses, waiting for essential pandemic relief funds, have become increasingly frustrated with the delays.
Witness Pat Cleary, President and CEO of the National Association of Professional Employer Organizations (NAPEO), expressed his concerns, stating:
“Their own website a week ago said that it was almost 500,000 in the backlog, so they clearly didn’t clear that out in a week. You know that’s the first problem that we’re seeing occur with this. And you see again, last week that it ticked back up by another few 100,000, so it’s almost at half a million. Whatever the problem is, there’s something out of whack with the count. And you know, and I agree we wish the Commissioner well, as I said, we’ve had a really good relationship with the IRS. But for his credibility, I think first shot out of the box, he needs to be credible and truthful in terms of describing what the backlog is.”
Some of these delays can be attributed to the manner in which to process these relief tax credits. “The problems at the IRS were present from the very beginning. For starters, the IRS forced all businesses to apply on paper and mail in the application. That has led to long delays. The IRS told my staff in May that 20% of claims have sat unresolved for more than four months, and we have heard from other businesses who say they have been waiting years. For small businesses who filed legitimate claims, this has become a major source of frustration with the IRS,” said Chairman Smith.
Oversight Subcommittee Chairman David Schweikert (AZ-01) also confirmed these sentiments by stating, “One of the challenges is the backlog of ERTC claims that the IRS still needs to process. Form 941-X, the form by which employers must file their ERTC claims, is a paper form. The employers had to file many ERTC claims retroactively. As a result of processing these claims by the IRS has been shown to create a massive backlog of unprocessed claims. Some employers have been waiting months if not years for the credits that still have not actually been processed. This delay has created immense hardship for employers, particularly small businesses who desperately need the help in retaining their employees during the height of the COVID-19 pandemic.”
The extended delays in processing ERC claims have hit employers hard, especially those relying on these refunds for their financial stability. The situation, marked by months of uncertainty and compounded by a lack of clear communication from the IRS, has escalated into a severe pain point for businesses.
Understanding the gravity of the situation,
OnCentive, a recognized leader in profitability consulting, has acted swiftly. Collaborating with various financial institutions, they've launched a
funding program specifically targeting this issue. This innovative solution circumvents the typical eight to nine-month wait from the IRS and provides a swift cash infusion to clients within weeks.
For further details on OnCentive’s funding program, visit
https://www.oncentive.com/covid-19-erc-funding.
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