How to Follow Up on Your Employee Retention Credit Refund

Many businesses are currently awaiting their Employee Retention Credit (ERC) refunds, a refundable tax credit designed to support employers who kept employees on payroll during the COVID-19 pandemic. This article provides a guide on how to track and follow up on the status of these refunds. It outlines the necessary information to gather, methods for checking status, factors contributing to processing delays, and steps for addressing unresolved claims.

Essential Information to Gather

Before following up on an Employee Retention Credit refund, businesses should compile specific documentation. Having this information readily available helps ensure efficient communication and verification when contacting the Internal Revenue Service (IRS). The Employer Identification Number (EIN) is necessary for the IRS to locate the business’s records.

Businesses must also have their exact legal business name and current address as filed with the IRS. Records of the specific tax periods (quarters) for which the ERC was claimed are important to pinpoint the relevant amended tax returns. The precise date the original Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, was submitted is also necessary for the IRS to track the claim’s entry into their system.

Keeping complete copies of the filed Form 941-X, including all schedules and attachments, provides a record of the claim submitted. This documentation verifies the amounts claimed and the calculations made, which can be referenced during inquiries. Any correspondence received from the IRS regarding the ERC claim, such as confirmation letters or requests for additional information, should also be kept organized. These notices may contain case reference numbers or specific instructions useful for status checks.

Checking Your Refund Status

Once essential information is organized, businesses can check their ERC refund status. The most direct method is contacting the IRS directly via phone. The IRS Business and Specialty Tax Line, 800-829-4933, operates Monday through Friday from 7 a.m. to 7 p.m. local time. When calling, be prepared to provide the Employer Identification Number, the exact business name, the relevant tax periods, and the date the Form 941-X was filed.

The “Where’s My Refund” tool on the IRS website is not effective for tracking amended returns like Form 941-X. This online tool primarily provides status updates for original income tax returns. While some online portals might show general tax account status, they do not offer detailed tracking for amended payroll tax returns or ERC claims.

Businesses should review all mail received from the IRS. Official correspondence may include status updates, requests for further documentation, or notifications of adjustments to the claim. Promptly addressing any requests for information is important to avoid further delays. A Notice CP210 often accompanies a refund check.

Understanding Refund Processing and Delays

The processing of Employee Retention Credit refunds, particularly those claimed on amended returns like Form 941-X, often involves extended timelines. Unlike original tax returns that may process within weeks, amended returns can take several months to over a year due to their complexity and the substantial volume of claims. The IRS has reported a significant backlog of unprocessed Form 941-X claims.

Various factors contribute to these prolonged processing times. A major cause is the sheer volume of claims, which inundated the IRS and led to a moratorium on processing new claims in September 2023 to address integrity concerns. The manual review process required for Form 941-X, as it cannot be e-filed, also adds to the delays. Fraud prevention efforts also play a role, as the IRS implements stringent verification processes.

Communication challenges and complexities in regulations have further complicated the process for both taxpayers and the IRS. Businesses might also experience delays if there are errors or discrepancies in their submitted application or if the claim triggers potential audit flags. Receiving IRS notices, such as CP notices, can indicate that the IRS has questions or has made adjustments to the claim, or is requesting repayment of a previous refund. These communications require careful attention, as they often signify that the claim is undergoing deeper review or that additional action is required from the taxpayer.

Steps for Unresolved Refunds

If a business has checked its refund status and faced significant delays without resolution, additional actions can be taken. If the IRS indicates that a refund was issued but the business has not received it, initiating a refund trace becomes necessary. This process helps determine if the refund check was lost, stolen, or misdirected. A refund trace can be initiated by calling the IRS refund hotline at 800-829-1954 or by submitting Form 3911, Taxpayer Statement Regarding Refund.

For cases involving significant delays that cause financial hardship, or when standard IRS channels have not resolved the issue, the Taxpayer Advocate Service (TAS) can provide assistance. The TAS is an independent organization within the IRS that helps taxpayers facing problems they cannot resolve through normal procedures. To qualify for TAS assistance, a problem must be causing financial difficulty, involve an immediate threat of adverse action, or remain unresolved after repeated attempts to contact the IRS. Businesses can contact the TAS toll-free at 877-777-4778 or by submitting Form 911, Request for Taxpayer Advocate Service Assistance.

Responding promptly and accurately to any IRS notices or information requests is important. Letters requesting additional information or clarification regarding the ERC claim must be addressed within the specified timeframe. Failing to respond or providing incomplete information can lead to further delays, disallowance of the claim, or potential penalties and interest. Such responses should include all relevant facts and supporting documentation to substantiate the claim.