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Small Businesses Hurt by Employee Retention Tax Credit Processing Delay

October 4, 2023

The IRS announced it will slow the processing of Employee Retention Tax Credit claims and will not process new claims until 2024

Small Businesses Hurt by Employee Retention Tax Credit Processing Delay

The Employee Retention Tax Credit (ERTC), also called the Employee Retention Cred or ERC, is a refundable tax credit available to employers based on wages paid to employees from March 13, 2020, through the first three quarters of 2021. The Internal Revenue Service (IRS) recently announced that it will slow the processing of existing ERTC claims and will not process new claims from small businesses until 2024. On September 18, NFIB released a statement in response to the IRS delay. “While misleading marketing for the Employee Retention Tax Credit remains a problem, the IRS should not penalize the hundreds of thousands of small businesses that have followed the eligibility rules, correctly filed claims, and need help now,” said Kevin Kuhlman, NFIB Vice President of Federal Government Relations. “NFIB has heard from many small business owners who are frustrated by the delays in processing claims and lack of communication from the IRS. By further delaying the processing of existing claims, the IRS is making it more difficult for small businesses to operate, keep employees, and create jobs.” The ERTC can still be claimed retroactively and provide significant refundable payroll tax credits, up to $26,000 per employee, to eligible employers for both the 2020 and 2021 tax years. Small business owners could apply for the ERTC if their business experienced a decline in gross receipts (at least 50% decline for the 2020 quarter; at least 20% decline for the 2021 quarter) compared to the same quarter in 2019 or if their business experienced a full or partial suspension of business operations due to a government order. There are two general ways a business can qualify for the ERTC:

The business experienced a decline in gross receipts (at least 50% decline for the 2020 quarter; at least 20% decline for the 2021 quarter) compared to the same quarter in 2019; or
Due to a government order, the business experienced a full or partial suspension of operations. This provision also extends to suppliers of a business. If a business can prove its operations were impacted because of the inability to obtain goods or materials from its suppliers, it may qualify for ERTC.

Employers can retroactively claim the ERTC by filing Form 941-X. The deadline to file Form 941-X is three years after the return of the business is amended (see instructions for Form 941-X on page 6). The Small Business Legal Center also encourages small business owners to use a CPA to claim the tax credit. Many third-party companies offer their assistance, but small business owners should be wary of their legitimacy. If a small business owner has a CPA they trust and their CPA needs extra guidance, NFIB has webinars and resources that can be provided. Reach out to the Legal Center with additional questions or for more information.

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