If your tax return seems to be taking a little longer this year than in the past, it probably has nothing to do with you. Rather, it’s most likely due to a backlog from the Internal Revenue Service (IRS).
As of July 29, 2023, the agency had roughly 1.2 million unprocessed individual returns, including 2022 returns, 2021 returns that need reviewed or corrected and late-filed prior-year returns. Although the IRS did this past March clear its end-of-2022 backlog of 1.4 million unprocessed individual and business returns and hire approximately 5,000 new taxpayer service agents to cut down call waiting times, it’s once again experiencing lengthy delays in getting refunds and credits to individuals and businesses.
Included in this backlog are tax credits due to eligible businesses through the submission of Form 941-X. This is the form used to submit documentation for the Employee Retention Tax Credit. Typically referred to as the ERC, this refundable tax credit was introduced in March 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The goal of this legislation was to encourage businesses to continue to pay employees while their company was either shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to Dec. 31, 2021.
When Will I Receive My ERC Refund?
Just how long is the ERC backlog? According to the most recent numbers from the IRS, their total inventory of unprocessed Forms 941-X — as of August 2, at least — was 511,000. The agency notes that some of those returns can’t be processed until the corresponding Form 941s have been dealt with and that the inventory is being managed at two sites with staff trained to handle COVID-19 credits.
Initially, the wait time for ERC refunds was six to eight weeks. However, some businesses have reported waiting anywhere from four to 12 months to receive their refund. Generally, the IRS processes and approves small refund amounts faster than it approves larger ones.
Here is the status of the IRS ERC backlogs over the first eight months of 2023:
- August – 505,000
- July – 506,000
- June – 642,000
- May – 992,000
- April – 929,000
- March – 890,000
- February – 651,000
- January – 468,000
As of Sept 6, there were approximately 637,000 unprocessed Forms 941-X.
Another delay in ERC processing time is fraudulent claims. As we mentioned in our blog, “How to Protect Yourself From ERC Scams,” although the Employee Retention Credit is a legitimate tax credit, the ERC made it to the IRS’ annual “Dirty Dozen” list, which warns taxpayers about the most common tax-related scams. Why? Due to the high volume of fraudulent ERC claims from taxpayers and some ERC promoters.
How Do I Check the Status of My ERC Refund?
Before you can track your ERC refund, it’s important to first ensure it was delivered to the IRS. Because the agency doesn’t allow businesses to file Form 941-X electronically, the submission had to be sent by mail to the applicable IRS service center.
Once you’ve confirmed that USPS delivered your Form 941-X, you can check to confirm it was entered into the IRS system. To do so, call the agency’s business helpline at (800) 829-4933. Make sure to have your federal employee identification number (EIN) and tax return information readily available.
Due to a shortage of IRS agents available to field phone calls, your on-hold time might be exceptionally lengthy. Also, speaking with an agent won’t accelerate your ERC refund status any faster. You also have the option to contact the IRS’ Taxpayer Advocate Service, which helps taxpayers resolve problems that have not been resolved through normal channels.
In what form you’ll receive your ERC refund depends on the option you selected on Form 941-X: via check or direct deposit. For more information on this, check out our blog on 6 Tips for Claiming the Employee Retention Credit.
If you haven’t yet taken advantage of the Employee Retention Tax Credit, our team of expert tax professionals can help guide you through the process. We have experience collaborating with business owners to ensure they receive maximum credit for each calendar year, and partnering with us can save you both time and effort when filing for your ERC. Contact us today to connect with one of our tax credit experts.