July 5, 2021
Recently, the IRS provided an update for returns and refunds that directly impact employers that have filed for the CARES Act Employee Retention Credit (ERC). Specifically, they addressed the status of processing Form 941, Employer’s Quarterly Federal Tax Return and Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.
Like many businesses in the United States, the IRS has also been impacted by COVID-19 which has caused delays in their services. These delays have impacted the IRS processing mail, tax returns, payments, refunds, and correspondence. This has caused many businesses that filed for the ERC to experience a longer than anticipated tax refund.
Fortunately, the IRS states they are now opening mail within normal timeframes and have also made significant progress in processing 941 Forms. As of May 6, 2021, the IRS had about 200,000 941 Forms received prior to 2021 in the processing pipeline. Including current year returns, as of May 6, 2021, they had 1.9 million unprocessed 941s in the pipeline.
The IRS is rerouting tax returns and taxpayer correspondence from locations that are behind to locations where more staff is available. They are also taking other actions to minimize any delay in processing returns and refunds. Tax returns are being processed in the order they were received, and the IRS is working hard to get through the backlog.
As of May 7, 2021, IRS’s inventory of unprocessed Forms 941-X was approximately 100,000 which cannot be processed until the related 941s are processed. While not all of these returns involve a COVID Employee Retention Credit, the inventory is being worked at two sites (Cincinnati and Ogden) that have trained staff to work possible COVID credits.