The most common question our ERC team receives these days isn’t in regard to qualifying or calculating the credit, but rather, when am I going to receive the refund? And as any great accountant will tell you, “It depends”. From our experience, the size of the credit appears to be the best determinant on when your company will receive the refund check.
I have called the IRS numerous times on the topic of ERC, and even the IRS agents don’t seem to know the magic number, but my best guess is $200,000. Any credits below $200,000 (per quarter) appear to be processed in the normal IRS timeframe – currently about 4 months on average. Anything over and it gets sent to an additional level of review, and we have some credits that we applied for 14 months ago and still nothing.
Understandably, this has been very frustrating for our clients and any companies that applied for these credits in hopes of a lifeline for their business. There was a lull over the spring and summer, as the IRS promised to work through the backlog by calendar year-end 2022, but scrutiny has picked up as that goal does not seem likely to be met. On August 31, 2022, the Treasury Inspector General for Tax Administration (TIGTA), issued an audit report titled “Delays Continue to Result in Businesses Not Receiving Pandemic Relief Benefits”.
The report is lengthy, but it highlights some of the major issues that have plagued the ERC processing time from the start. And while the backlog of unprocessed 941-X’s has decreased from the highs seen earlier this year, there are still over 200,000 unprocessed at the end of August! Even more shocking is the amount of potential fraud that TIGTA and the IRS has identified – to the tune of approximately $2 trillion. The report also suggests continued and enhanced scrutiny on larger credits, which undoubtedly is adding to the delay in processing times.
So, what can you do about it? The first option would be to call the IRS. Unfortunately, responses to the general IRS hotlines can be very limited. If your accountant/tax preparer assisted you with our ERC filing (or even if not), your chances of getting through to the IRS may be improved by filing a Form 2848 and authorizing your accountant to call on your behalf. There is a designated hotline for tax practitioners only that typically has a better response rate.
Once you or your practitioner connect with the IRS, the information provided is typically limited. They will confirm that the forms have been received and if they’re in processing, but not much else. However, if your business has been waiting on the funds for an extended period, and the delay is potentially causing economic harm, the Taxpayer Advocate Service is another avenue to explore. The Taxpayer Advocate Service is an independent organization within the IRS that works on behalf of taxpayers to resolve issues with the IRS that have yet to be resolved through normal channels.
Please contact us if you have any questions on the status of your refund or the Employee Retention Credit in general.