As an employer, once I have submitted my employee retention credit claim, when can I expect to receive my refund?
As an employer, if you’ve already claimed the Employee Retention Credit (ERC), chances are you’ve been wondering when you’ll get your refund. According to the IRS, most employers can anticipate receiving their ERC refund within approximately 4 to 6 months after filing, although some may receive it sooner. Please be aware that the expected timeline for receiving your ERC refund may be subject to change based on a variety of factors, including the total number of quarterly claims that have been submitted.
So, when can you expect your ERC refund?
Key ERC Takeaways:
- The IRS aims to issue most refunds within 90 days of filing.
- The timing of refunds may vary based on the volume of claims and other factors.
- To track the status of your refund, you can use the IRS’s online tool called “Where’s My Refund?”
- The IRS works diligently to process and distribute refunds as efficiently as possible.
If you have not already filed, you can still claim the employee retention credit retroactively in 2023, 2024, and 2025.
Essential Information About the Employee Retention Tax Credit Refunds
The Employee Retention Credit (ERC) is a refundable tax credit against certain employment taxes that provides financial relief to eligible businesses affected by the COVID-19 pandemic.
What Is ERC, And How Does It Work?
The Employee Retention Credit (ERC) is a refundable tax credit designed to encourage small and medium-sized businesses to retain their employees even during financially challenging times.
Under this program, eligible employers can claim 50% of qualified wages paid to employees up to $10,000 per employee annually. For example, if an employer has ten workers who each earn $5,000 in eligible wages during a quarter, the total credit amount would be $25,000 (50% x [$5,000 x 10]).
The credit is applied against certain employment taxes such as Social Security and Medicare taxes withheld from employees’ paychecks. If the computed ERC exceeds these tax liabilities for a given period, the employer will receive a refund for any excess amount from the IRS.
Claiming ERC requires filing an amended Form 941 or other appropriate forms with accurate documentation supporting your eligibility and indicating wage payments made during qualifying periods.
Eligibility Criteria For ERC Refunds
Employers must meet certain eligibility criteria to qualify for an Employee Retention Tax Credit refund. Firstly, they need to be experiencing a full or partial suspension of business operations due to government-imposed COVID-19 restrictions, resulting in a significant reduction in revenue.
Eligibility also extends only to those wages paid after March 12th, 2020, and before January 1st, 2021. Importantly, qualified wages include not just regular salary payments but also health plan expenses paid on behalf of workers by the employer.
Remember that there are also limitations regarding employee headcount – employers with more than 100 full-time employees can claim refunds only for retained workers but not actively performing services during this time frame.
Refundable Vs. Non-Refundable Credits
Understanding the difference between refundable and non-refundable tax credits is crucial for small to medium-sized business owners who want to maximize their benefits from Employee Retention Credits (ERC).
In simple terms, a refundable credit allows taxpayers to receive a refund if the amount of the credit surpasses their total tax liability.
Let’s take a closer look using an example: Suppose your company has $10,000 in eligible wages and qualifies for ERC at 50%, which equals a $5,000 tax credit. Now imagine that you owe $3,000 in employment taxes.
If ERC were non-refundable, it could eliminate this tax liability without generating additional cashback. However, since ERC is considered a refundable credit in this case, you not only wipe out the owed taxes but also receive an additional $2,000 as a monetary on a tax return ($5,000 – $3,000 = $2K) from the internal revenue service (IRS).
Timeline For ERC Refunds
The timeline for ERC refunds can vary depending on the IRS processing time, verification and audit process, filing errors or omissions, submitting required documentation, COVID-19 related delays, and other factors that may affect the refund processing time.
IRS Processing Time
Due to various factors, the IRS processing time for ERC refunds is subject to delays. These include verification and audit processes, filing errors or omissions, and delays in submitting required documentation.
The COVID-19 pandemic also impacts the processing time, as the IRS has reduced staffing levels and may take longer to process claims. Additionally, the volume of applications can affect the turnaround time for refunds.
While some businesses have reported waiting up to 12 months for their ERC refunds, taxpayers claiming the credit earlier in the process can expect a shorter wait time of 4-9 months.
Verification And Audit Process
After filing for an Employee Retention Credit (ERC) refund, the IRS may verify your eligibility and audit your business’s payroll tax returns. This process is in place to ensure that only eligible employers receive the credit and that their refund amounts are accurate.
The verification and audit process may cause a delay in receiving your ERC refund, especially if errors or discrepancies are found during the review. To avoid these delays, it’s essential to double-check all information before submitting your application for an ERC refund and provide sufficient documentation to prove your eligibility.
Filing Errors or Omissions
Ensuring that all necessary information is included in ERC refund applications is essential, as filing errors or omissions can delay the processing time. The IRS may reject incomplete or inaccurate applications and request additional documentation, prolonging refund wait times.
Some common mistakes include failing to update mailing addresses or bank information, not providing sufficient documentation, and disputing eligibility requirements. Employers should carefully review their application form before submission to avoid delays in receiving their ERC refund checks.
Delays In Submitting Required Documentation
One common reason for delays in processing Employee Retention Credit refunds is errors or omissions in the required documentation. These errors could include missing information or invalid forms, which can cause the IRS to require additional time for verification and processing.
To avoid these delays, small to medium-sized business owners must double-check all submitted documentation before filing. This quality control check can help catch any potential errors before they become problematic and delay refunds.
Additionally, working with a tax professional specializing in ERC applications may help ensure all paperwork is complete and accurate when submitting claims.
COVID-19 Related Delays
The COVID-19 pandemic has caused significant delays in many government processes, including the processing of ERC refunds. The IRS has faced staffing shortages and backlog due to safety precautions and social distancing measures, causing significant delays in refund processing times.
These delays have been frustrating for many small to medium-sized business owners eagerly awaiting their refunds to help with cash flow and keeping their businesses afloat during these challenging times.
However, it’s essential to understand that the IRS works diligently to process all claims as quickly as possible while maintaining accuracy and compliance with tax laws.
Factors Affecting ERC Refund Processing Time
The factors that can affect ERC refund processing time include the volume of applications, errors in paperwork, IRS staffing levels, verification and audit process, COVID-19 related delays, and any delays in submitting required documentation.
Volume Of Applications
A high volume of applications for the Employee Retention Credit (ERC) and large refunds can also cause delays in refund processing. As more businesses become aware of the credit and file for it, the IRS has had to deal with a significant increase in workload.
This backlog can result in longer wait times for processing refunds, as requests are processed on a first-come first-served basis. Moreover, errors or omissions made in your submission due to pressure could lead to further delays as additional audits and verifications will be carried out by the IRS staff.
Errors In Paperwork
Errors in paperwork can be a common reason for delays or even denials of ERC refunds. Simple mistakes such as an incorrect employer or federal identification number or numbers, incomplete documentation, or misreported wages can all cause issues with processing your refund.
It’s important to double-check all information before submitting your application and ensure you have included all necessary documentation. Amended Forms 941 that have already been filed can expect to receive refunds.
Additionally, promptly responding to any correspondence from the IRS regarding your refund can help prevent further errors and speed up the process.
IRS Staffing Levels
The number of IRS staff available to process ERC refunds can significantly affect processing times. If the agency is understaffed or overwhelmed with requests, it can lead to delays in processing refund requests and claims.
The COVID-19 pandemic also impacted staffing levels at the IRS, causing some offices and departments to close temporarily or limit their operations. As a result, taxpayers may need to wait longer than expected for their refunds.
It’s important to remember that despite these challenges, the IRS works diligently to process all eligible claims as quickly as possible.
Estimated Timeline For ERC Refunds
Taxpayers can expect ERC refunds to take anywhere from 6 weeks to 9 months, depending on the last tax return form filed and when it was submitted.
Processing Time For Various Forms
Once you have filed for the Employee Retention Credit (ERC), the processing time for your refund will depend on the submitted form. Form 941 is typically processed quicker than an amended Form 941-X, which can take longer due to additional verification and auditing processes.
Taxpayers who claimed ERC earlier in the filing process may have a longer wait time of 4-9 months, while taxpayers submitting more recently may experience even longer waits due to a backlog caused by high application volume.
Some businesses have reported waiting up to 10-12 months or more for refunds.
Expected Wait Times
ERC refund processing time can vary depending on several factors, including the volume of applications and errors in paperwork. According to the IRS, taxpayers claiming the credit earlier in the process can expect to wait 4-9 months for their refunds.
However, due to a backlog caused by increased demand and COVID-19 related delays, some taxpayers have reported waiting longer than 10-12 months for their ERC refunds.
It’s essential to double-check all information before submitting your claim, as mistakes or omissions may cause further delays in processing times. Working with a tax professional knowledgeable about ERC eligibility criteria and filing requirements to speed up the refund process can help ensure everything is correctly submitted.
Availability of Direct Deposit
If you’re eagerly awaiting your Employee Retention Credit refund check, you may want to consider opting for direct deposit to receive your payment. Direct deposit is the fastest and most secure way to get your funds, as it eliminates the need for checks or mail delivery.
However, not all taxpayers are eligible for direct deposit. For example, some accounts may have safety measures that prevent deposits from unknown sources.
According to recent updates, amended Forms 941 already filed can expect refunds via direct deposit if customers opt-in before filing their forms.
How To Check The Status of Your Refund
To check the refund status of your ERC refund, you can use the IRS refund status tracker or contact the IRS helpline, and make sure to have all necessary information on hand.
Using The IRS Refund Tracker
To check the status of your ERC refund, you can use the IRS refund tracker. This online tool will give you an estimate of when you can expect to receive your refund. To use the tracker, you’ll need to provide some basic information about yourself and your refund and tax return information, such as your social security number and filing status.
Remember that the refund tracker may not have up-to-date information if there are any delays or issues with your application. Additionally, any mistakes on your initial application or paperwork may cause further delays in receiving your refunded amount.
Contacting The IRS
If you have questions about your Employee Retention Credit refund or would like to check the status of your refund, you can contact the IRS through their helpline or website.
The IRS has a toll-free number for general tax-related questions and refund assistance, available Monday through Friday from 7 am to 7 pm local time. When contacting the IRS, be sure to have your tax identification number and other necessary information readily available.
Additionally, keep in mind that due to high call volume and processing delays caused by COVID-19, wait times for phone calls may be longer than usual.
According to recent reports, taxpayers claiming employee retention credits earlier in the process should expect a waiting period of 4-9 months. Others have reported delays of up to 12 months or more for their ERC refunds.
To check the status of your Employee Retention Credit refund, you’ll need to provide some basic information, including your social security number or employer identification number, the tax year and quarter in which you claimed the employee retention tax credit amount, and any other relevant details about your business.
In some cases, additional documentation, such as proof of eligible wages and payroll reports, may be required. If you’re working with a tax professional, they can help ensure that all necessary documents have been submitted and everything is accurate.
Common Errors And Mistakes That Can Delay Refund Processing
Failing to update mailing addresses or bank information, insufficient documentation, and disputed eligibility are common errors and mistakes that can delay ERC refund processing.
Failing To Update Mailing Address Or Bank Information
One of the most common errors that can delay your ERC refund is failing to update your mailing address or bank information. If you have recently moved or changed your business banking details, updating this information with the IRS as soon as possible is important.
To avoid this mistake, double-check that all contact and payment information on your tax forms is accurate before submitting them. Respond promptly if you receive any correspondence from the IRS requesting updated information or clarification.
Failing To Provide Sufficient Documentation
One of the most common mistakes that can delay ERC refund processing is failing to provide adequate documentation. As an eligible employer, you must submit specific forms and reports to support your claim for the credit.
Failure to include all necessary information or omitting important details could delay the processing of your refund.
Examples of insufficient documentation may include
- missing pay records or employee data,
- incorrect tax identification numbers,
- incomplete payroll tax returns, or
- inaccurate filing status.
Therefore, it’s crucial always to review everything carefully and work with a tax professional who can help advise on which documents are needed; otherwise, errors will cause delays in receiving your refund.
In some cases, the IRS may dispute the eligibility of a business for an Employee Retention Credit refund. This can cause delays in processing and receiving refunds.
If your eligibility for the credit is disputed, it is important to address any issues promptly and provide any necessary documentation requested by the IRS. Working with a tax professional can also help resolve disputes and meet all requirements.
Recent Updates And Changes To ERC Refund Processing
Recent updates and changes to ERC refund processing include changes to eligibility criteria, legislative updates, and IRS guidance on how to claim the credit.
Changes To Eligibility Criteria
It’s important to stay updated on any changes to the eligibility criteria for Employee Retention Credit refunds. In March 2021, the American Rescue Plan Act expanded employee retention tax credit eligibility, allowing more businesses to qualify.
This includes those that started operations after February 15th, 2020, and businesses with less than 20% revenue declines. Additionally, employers who receive Paycheck Protection Program (PPP) loans may still be eligible for the ERC.
Reviewing these changes and ensuring you’re taking advantage of any opportunities for your business to receive a refund is crucial.
Legislative updates are constantly being made to the Employee Retention Credit program, and it’s essential for small to medium-sized business owners to stay informed. For instance, the American Rescue Plan Act of 2021 extended the ERC program through December 31st, 2021.
Additionally, eligible employers can now claim a maximum credit of up to $28,000 per employee for wages paid from January 1st through June 30th this year. It’s important to monitor legislative updates as they may impact eligibility criteria and refund processing times.
IRS Updates And Guidance
The IRS regularly updates its guidance on the Employee Retention Credit, which can affect eligibility and processing times. It’s important to stay informed and up-to-date with any changes or updates to the ERC refund process.
For example, in March 2021, the IRS announced that employers receiving PPP loans are now eligible for ERC refunds for wages not paid for by PPP loans. Additionally, the IRS has guided how to claim ERC credits for certain qualified wages paid in 2020 and how to apply those credits to future payroll taxes.
Tips To Speed Up The Refund Process
Double-check all information before submitting to avoid errors and delays.
Double-checking All Information Before Submitting
Double-checking all information before submitting is an important tip to speed up the ERC refund process. Errors and omissions can cause delays in processing, which will lengthen how long it takes to receive your first refund check.
Ensure all eligibility criteria have been met, forms are complete, and required documentation has been provided.
According to reports from taxpayers claiming the credit earlier in the process, refunds may take 4-9 months on average, depending on various factors, including the volume of applications and errors in paperwork.
Working With a Tax Professional
Working with a tax professional can be incredibly helpful when navigating the Employee Retention Credit refund process. A tax professional can guide eligibility criteria and ensure all necessary documentation is included in your application.
In addition, a tax professional can help you promptly respond to any correspondence from the IRS and ensure that you are taking advantage of all available tax credits and deductions.
Many businesses have found working with a tax specialist valuable when claiming the ERC credit, as they often reduce the time it takes for refunds to arrive.
Responding To Any Correspondence From The IRS Promptly
It is crucial for small to medium-sized business owners to promptly respond to any correspondence from the IRS regarding their ERC refunds. The IRS may request additional documentation or clarification on certain aspects of the refund claim. Failure to respond promptly can result in further delays or even denial of the refund.
Therefore, it is recommended that business owners designate a point person within their organization responsible for monitoring all communications related to their ERC refund claim and promptly responding with accurate information.
COVID-19 Impact On Employee Retention Credit Refunds
COVID-19 has caused potential delays and changes to the ERC refund process, and businesses need to stay informed and prepare accordingly.
Delays And Potential Changes To The Process
The current backlog in processing ERC refunds has caused significant delays for many businesses and small business owners. The IRS previously stated that refunds would be issued within six weeks to 6 months after updated payroll reports are filed. However, some taxpayers have reported waiting 10-12 months or longer for refunds.
Additionally, potential changes to the process due to COVID-19 could cause further delays and impact the timeline for receiving your refund. It’s important to stay informed and prepared as you navigate the ERC refund process, double-checking all information before submitting and responding promptly to any correspondence from the IRS.
How To Prepare And Stay Informed
Staying informed about the ERC refund process can help you prepare for delays or issues. Keep track of all eligible wages and update your records regularly to ensure you accurately claim the credits.
Additionally, it’s important to stay up-to-date on any changes in ERC regulations or IRS guidance that may affect your eligibility for refunds.
Remember that while some taxpayers have reported waiting up to 10-12 months or longer for their refunds, some have received theirs within a few weeks of filing their amended payroll tax returns.
Conclusion and Summary Answering When Will I Get My Employee Retention Credit Refund?
The Employee Retention Credit (ERC) is a valuable tax credit for eligible businesses to claim. As the IRS continues to process the backlog of applications, it’s understandable that business owners may be frustrated with the wait time for their refunds.
However, it’s important to note that the IRS is working to prioritize processing ERC refund requests and has made progress in recent months. Businesses should continue monitoring their refund status and contacting the IRS if they have any concerns or questions.
In the meantime, businesses may consider speaking with a tax professional to ensure they maximize their ERC qualification and refund potential. Remember, the ERC can be a significant source of financial relief for businesses impacted by the pandemic.
While the wait may be frustrating, it’s encouraging to see the progress made in processing ERC refunds. By staying informed and taking advantage of the resources available, businesses can maximize their refund potential and continue to weather the challenges of the COVID-19 pandemic.
Good news. There is still time to file! The employee retention tax credit can still be claimed retroactively and there is still time to file, even in 2023, 2024, and 2025 for the past tax years.
Employee Retention Tax Credit (ERC / ERTC) Help: Claim Up To a $26,000 Refund Per Employee for Your Business
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Depending on eligibility, business owners can receive up to $26,000 to $33,000 per employee based on the number of W2 employees you had on the payroll in 2020 and 2021.
The ERC / ERTC Program is a valuable IRS tax credit you can claim. This is money you have already paid to the IRS in payroll taxes for your W2 employees.
Schedule Your Free Employee Retention Credit Consultation to see what amount $ of employee retention tax credit your company qualifies for.