The IRS is slowly addressing its backlog of employee retention credit (ERC) claims. In September 2023, the agency halted processing of ERC refund claims filed on Form 941-X. It has since sent out 28,000 letters denying refunds to employers whose claims, according to the IRS, carried a high risk of errors.
The IRS plans to soon process 50,000 claims that it deems to have zero or low risk of errors, and which were filed before September 14, 2023. The agency expects to issue refunds on these valid claims starting next month. Additionally, the IRS anticipates processing another large batch of low-risk claims in the fall. The agency also intends to tackle Form 941-X filings submitted between September 14, 2023 and January 31, 2024, which it believes have either the highest or lowest risk of errors.
Employers are growing impatient waiting for the IRS to pay out their ERC refunds. Some have resorted to legal action, filing lawsuits against the agency to recover amounts they claim are owed to them. For instance, one firm has filed a complaint in a federal district court in Pennsylvania, asserting that it qualifies for the ERC, submitted its refund claims on Form 941-X on January 17, 2024, but has yet to receive the refund.