How Long Does It Take to Get an ERC Refund from the IRS?

The Employee Retention Credit (ERC) is a refundable tax credit for businesses that retained employees during the COVID-19 pandemic. Established under the CARES Act, it incentivized employers to keep workers on their payrolls despite economic disruptions or government-mandated suspensions of operations.

The ERC Refund Journey

Once a business submits an ERC claim, typically using Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, the IRS begins processing. Claims are manually entered into the IRS system, as Form 941-X cannot be electronically filed.

Following data entry, claims undergo a review and validation phase. The IRS examines submitted information for accuracy and completeness, comparing it against existing records to identify discrepancies or errors that could delay processing.

Some claims may trigger a manual review by IRS personnel, especially for large refund requests or due to concerns about improper or fraudulent submissions.

If a claim passes all review stages, the IRS proceeds with refund issuance. This generally involves generating a paper check, as ERC refunds are typically not direct deposited. The refund check is then mailed to the address on file for the business.

Current Processing Durations

The time to receive an ERC refund has extended significantly. Initially, processing times were estimated at a few weeks, but they have since lengthened considerably. Businesses should anticipate substantial delays in receiving their refunds.

Current estimates suggest businesses may wait anywhere from four to twelve months, or even longer, for their ERC refunds. The IRS has acknowledged a large backlog of unprocessed ERC claims, with millions of claims awaiting review.

In September 2023, the IRS announced a temporary moratorium on processing new ERC claims to implement safeguards against improper claims. While some low-risk claims filed before this moratorium have started to process, many claims remain pending. The IRS has also indicated it will process claims filed between September 14, 2023, and January 31, 2024, starting with those least likely to be improper.

Factors Influencing Refund Speed

Several factors contribute to the variability in ERC refund processing times. The sheer volume of claims submitted to the IRS is a primary reason for delays, as millions of businesses have sought the credit, creating a substantial workload for the agency.

IRS staffing levels also play a role, as a shortage of personnel can slow down the manual review and processing of paper-filed Form 941-X. The complexity of a claim can also extend processing; for example, claims involving multiple quarters, large refund amounts, or intricate eligibility scenarios often require more extensive review.

Errors or omissions on the submitted forms are a common cause of delays. Incomplete or inaccurate information can lead to the IRS requesting additional documentation, pausing the processing until the issues are resolved. Claims flagged for potential audit or requiring manual review also experience longer wait times. The IRS has increased scrutiny on ERC claims due to concerns about improper filings, leading to many legitimate claims being subject to additional review.

Monitoring Your Refund Status

Businesses can monitor the status of their submitted ERC refund. The IRS does not offer a direct “Where’s My Refund” tool specifically for ERC claims, which are generally filed on amended employment tax returns like Form 941-X. However, taxpayers can verify that their forms were received by checking their IRS online account or the Electronic Federal Tax Payment System (EFTPS) if filed electronically.

For more specific inquiries about an ERC refund, businesses can contact the IRS Business and Specialty Tax Line at 800-829-4933. When calling, it is important to have the business name, Employer Identification Number (EIN), the tax quarter(s) in question, and details about the specific forms submitted and their submission dates readily available. Due to high call volumes, taxpayers should be prepared for long wait times.

Resolving Refund Delays

If an ERC refund is significantly delayed beyond the stated processing times, businesses have avenues to pursue. One option is to contact the IRS Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS that assists taxpayers experiencing problems they haven’t been able to resolve through normal IRS channels or who face financial hardship due to delays.

To request assistance from TAS, a business can file Form 911, Request for Taxpayer Advocate Assistance. This form allows the taxpayer to explain the financial hardship caused by the delayed refund and provide details supporting their ERC eligibility. TAS may be able to intervene and prioritize cases that meet certain criteria, such as economic harm or significant costs incurred due to the delay.

Businesses may also receive notices from the IRS requesting additional information or notifying them of a claim disallowance, such as Letters 105C or 106C. It is important to review these notices carefully and respond promptly with the requested documentation. If a claim is disallowed, taxpayers typically have 30 days to respond to the notice, but up to two years to file an appeal and provide additional documentation to support their eligibility.