How Long Does It Take to Receive an ERC Refund?

The Employee Retention Credit (ERC) was a refundable tax credit designed to support businesses that retained employees during the COVID-19 pandemic. Many businesses claimed this credit and are now awaiting their anticipated refunds, which represent a crucial financial lifeline. The process of receiving these funds has been met with complexities, leading to considerable delays for many eligible employers.

Current Refund Processing Timelines

Businesses awaiting their Employee Retention Credit (ERC) refunds often face extended processing times. The Internal Revenue Service (IRS) has experienced a substantial backlog of these claims, impacting refund issuance speed. While the IRS previously estimated processing times could be as short as three months, current realities indicate a much longer wait.

As of mid-2024, the IRS has significantly slowed or paused the processing of many ERC refunds, including valid and well-documented ones. Claims filed earlier, generally before the September 2023 moratorium, might face wait times of around nine to ten months. More recent filings, however, could experience even longer delays, potentially extending to 12 to 14 months or more.

The IRS implemented a moratorium on processing new ERC claims on September 14, 2023. This pause primarily addresses concerns about fraudulent claims and implements a more rigorous review process. During this period, the IRS prioritized smaller and less complex claims. Larger refunds, typically those exceeding $250,000, are often flagged for manual review, which can lead to indefinite timelines.

The sheer volume of claims and the need for enhanced scrutiny have created unprecedented wait times. For instance, between mid-August and mid-October 2023, approximately 45,000 ERC claims were filed weekly, but the IRS processed only about 150 claims per week. This disparity further exacerbates the backlog, leading to continued delays for businesses relying on these funds.

Factors Influencing Refund Processing

Several elements contribute to the extended processing times for Employee Retention Credit (ERC) refunds. The sheer volume of applications submitted by businesses has significantly overwhelmed the Internal Revenue Service’s (IRS) resources, creating a substantial backlog.

The complexity inherent in the ERC program’s regulations also plays a role in delays. Determining eligibility involves intricate calculations and documentation requirements, which can complicate the review process. Any discrepancies or missing information in a submitted claim can lead to further scrutiny and delays, as the IRS may require additional documentation.

A significant factor in current delays is the IRS’s intensified focus on fraud prevention. The agency has flagged an estimated 80% of ERC claims for further review, even legitimate ones, as part of a nationwide effort to combat fraudulent or inflated filings. This increased scrutiny often subjects claims to audit-like reviews, which adds considerable time to the processing timeline. Claims for larger refund amounts, particularly those over $250,000, are more likely to be routed to special IRS review teams and face longer delays.

The involvement of third-party preparers has also contributed to the IRS’s cautious approach. Aggressive marketing by some promoters led to a surge in questionable claims, prompting enhanced verification processes. This situation means that even properly filed claims can get caught in a slower processing queue due to systemic efforts to identify and address improper submissions.

How to Check Your Refund Status

Once an Employee Retention Credit (ERC) claim has been submitted using Form 941-X, employers can monitor its status through specific Internal Revenue Service (IRS) channels. Unlike individual income tax refunds, there is no direct online tool specifically designed for tracking ERC refunds. Businesses generally rely on direct communication with the IRS or their tax professionals.

The primary method for checking the status of an ERC refund is by contacting the IRS Business and Specialty Tax Line. You can reach them at 800-829-4933. When calling, it is important to have specific information readily available, including your Employer Identification Number (EIN), the tax quarters for which you filed amended returns, the date you mailed your Form 941-X, and the expected refund amount. Callers should be prepared for potentially long wait times.

Another avenue for businesses to check on their tax records, which may indirectly provide insight into their ERC claim, is through the IRS Business Tax Account online tool. This online service allows eligible businesses to view their tax history, download transcripts for various forms like Form 941, and access certain notices. While it doesn’t offer a direct “Where’s My ERC Refund?” tracker, reviewing tax transcripts can sometimes indicate if a claim is under review or provide other relevant account activity.

For businesses that utilized a tax professional to assist with their ERC claim, that professional can often check the status on the employer’s behalf. This typically involves the professional using their Power of Attorney authorization to communicate directly with the IRS regarding the claim. Regular follow-up with the IRS, whether directly or through a tax professional, is recommended, as the agency does not always provide proactive updates on the status of amended payroll tax returns.

What to Do If Your Refund is Delayed

If an Employee Retention Credit (ERC) refund is significantly delayed, businesses have several avenues to pursue. One initial step is to contact the IRS directly. Calling the IRS Business and Specialty Tax Line (800-829-4933) can provide current information on the claim’s status. While IRS representatives may indicate the claim is in processing without details, this contact establishes a record of inquiry.

For businesses experiencing financial hardship due to a prolonged ERC refund delay, the Taxpayer Advocate Service (TAS) can offer assistance. TAS is an independent IRS organization that helps taxpayers resolve problems when normal IRS channels are not effective or when delays cause significant hardship. To request TAS assistance, businesses can submit Form 911, “Request for Taxpayer Advocate Service Assistance.” TAS can intervene to investigate the case, communicate with the IRS on their behalf, and potentially expedite the claim.

When making inquiries or seeking assistance, have all relevant documentation organized and readily available. This includes copies of the filed Form 941-X, payroll records, proof of business suspension or revenue decline, and any IRS correspondence. Being prepared allows for a more efficient discussion and helps address any questions or requests from the IRS or TAS promptly.

Potential reasons for delays include the claim being flagged for additional review, missing information, or being misplaced. If the IRS requests additional documentation, responding promptly and comprehensively is crucial to avoid setbacks. If a refund claim has been pending for six months or more without resolution, a business might consider filing a refund lawsuit in federal court, which compels IRS review. This option, while more involved, can provide a structured path forward when other avenues have been exhausted.