Frustration with IRS delays in Employee Retention Tax Credit processing intensifies

October 10, 2023

If you are waiting to receive an Employee Retention Tax Credit from the IRS, you aren’t alone.[caption id="attachment_14385" align="alignright" width="213"]

Employee Retention Tax Credit

Businesses are waiting months to receive their Employee Retention Tax Credit due to significant backlogs with the IRS' paper-form processing. [/caption]Small businesses across the country are reporting significant delays in receiving the tax credit, which was created as a means to help employers through slowdowns or shutdowns due to the Covid-19 pandemic. The issue: The IRS is having difficulty keeping up with the processing of hundreds of thousands of paper tax forms. That is leading to months-long delays for businesses to receive their credit, upwards of six to nine months according to some reports.Employers that wanted their Employee Retention Tax Credit to be applied retroactively had to apply their IRS Form 941-X, a paper form that requires manual processing.“The problem is that the IRS has been inundated with paper tax forms and has fallen significantly behind in processing these documents,” Thom Stohler, vice president for federal government affairs at the National Association of Professional Employer Organizations, wrote in a June 24 email to members. He notes the IRS had a backlog of 440,000 Forms 941-X at the beginning of the year, a total that has since been whittled to around 215,000 as of mid-June. In a larger sense, the IRS is believed to have more than 21 million unprocessed paper tax forms. Stohler says of that total, an estimated 900,000 are paper business tax forms.“Further adding to the delay: Large ERTC credit claims are being reviewed twice by the IRS before being issued,” Stohler wrote.The IRS has assigned a 1,200-employee “surge team” to help further reduce the paper-form processing. This comes amid increased pressure from members of the United States Congress for the IRS to take further action to eliminate the backlog.“We know a group of House of Representatives and Senators are tackling this issue with the IRS,” says Todd Matheny, Syndeo’s Chief Financial Officer. “If you want to have your voice heard, please reach out to your representative. The more they hear about an issue, the more likely they are to do something about it.”Stohler says the IRS is attempting to hire 10,000 additional employees, but that process has been slow going.If you have called for a status update on the Employee Retention Tax Credit, those calls often go unanswered due to staffing shortages. Stohler says in some cases paper filings are not able to be tracked down because they haven’t yet been entered into the IRS’ computer system.Meanwhile, frustration about a lack of movement on implementing scanning technology and training more customer service representatives continues to intensify.“The delay in processing requests for ERTCs is part of a much larger problem the IRS is having with clearing out a backlog of 20 million-plus paper tax forms,” Stohler says. “These problems are a combination of the effects of Covid on the IRS workforce and existing problems with IRS technology and personnel that the Covid tax credits further exacerbated.”About us: As the Heartland’s leading employer services company, Syndeo partners with local business owners to help them minimize risk, improve efficiency and maximize profitability allowing them the freedom to focus on growth and fulfilling their mission. Syndeo fulfills its mission by taking on all of the HR responsibilities for our clients’ workforce, including employee relations, benefits, risk management and payroll. Winner of the 2020, 2021 and 2022 Best of HR Services Award through ClearlyRated for providing superior client service. See our ClearlyRated profile here.

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