While many employers were relieved when the Employee Retention Credit became available to provide assistance from pandemic impacts, those same employers are now feeling frustrated due to the Internal Revenue Service’s lack of speed to process these credits.
The Employee Retention Credit (ERC) was originally established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020 to assist businesses struggling due to the Covid-19 pandemic. Since its enactment, the ERC has been extended and expanded through subsequent legislation and provides employers with a refundable tax credit of up to $26,000 per employee for 2020 & 2021.
Businesses of various sizes and industries have been able to take advantage of this opportunity, but many are still waiting to receive their funds. New tax laws, impacts of the pandemic, and various other factors led to the IRS’s unprecedented amount of unprocessed tax returns. Unfortunately, this has caused many employers to experience delays of 6 months to almost a year in receiving their refunds.
However, the IRS recently announced that they would be hiring 10,000 new employees between now and September 2023 in order to eliminate the backlog in tax credit filings. Other improvements to decrease wait times include investments in technology, tools, and self-service portals.
The IRS also addressed the backlog in processing amended returns by taking into consideration the additional income tax owed due to retroactively claiming the ERC. Since many employers have not yet received their refund payment, they may be eligible for penalty relief for failing to pay their taxes if they can show reasonable cause and not willful neglect for failure to pay.
OnCentive is closely monitoring IRS’s progress and will continue to provide updates. Despite the IRS delay, OnCentive works on a 100% success-based program, meaning we do not receive compensation for work we have completed on your behalf until you do.