Press Release

Gillibrand Demands IRS Address Backlog, Issue Overdue Tax Refunds to Small Businesses

May 5, 2023

U.S. Senator Kirsten Gillibrand held a video press conference to demand that the Internal Revenue Service (IRS) address its backlog and issue overdue Employee Retention Credit (ERC) refunds to small businesses and nonprofits that have filed for them. The ERC was established in 2020 to provide tax relief to businesses that retained their employees during the pandemic. The IRS currently has as many as 1 million unprocessed ERC claims, meaning that many struggling small New York businesses have yet to receive the money they are owed. 

At the height of the pandemic, thousands of small businesses did the right thing and kept their employees on payroll,” said Senator Gillibrand. “They were promised reimbursement, but years after the fact, they still haven’t received it. I am calling on the IRS to speed up its processing to fix this problem as soon as possible and get our hard-working small business owners the refunds they deserve.”

Gillibrand’s letter to IRS Commissioner Daniel Werfel requests that the agency provide state-by-state numbers on the current ERC backlog and information on its planned timeline for resolving it. 

The full text of the letter can be found here or below: 

Dear Commissioner Werfel,

I write today to express my concern with the backlog of unprocessed Employee Retention Credit (ERC) claims and to urge the Internal Revenue Service (IRS) to provide updates regarding its work on resolving this significant problem.

In the over three years since the passage of the bipartisan Coronavirus Aid, Relief, and Economic Security Act (CARES Act), I have continued to hear from New York businesses that have yet to receive their tax refunds for claims filed in March of 2021 for wages paid in 2020. ERC was created as a payroll credit to ensure that the benefit could be delivered quickly, and, especially with increased funding from the Inflation Reduction Act, it is important that ERC refunds are sent with urgency.

As I stated in my prior letter to then-Commissioner Rettig on January 26, 2022, I understand that the backlog is caused in part because the 941-X form—which some taxpayers must file in order to claim this refund after overpaying estimated payroll taxes—must be submitted manually rather than electronically. I also recognize that chronic underfunding has left the IRS understaffed and reliant on outdated technology. That is one of the reasons I am proud to have fought to pass the Inflation Reduction Act, which includes historic funding for the IRS that will help improve customer service and modernize its systems. However, given that the backlog of unprocessed ERC payments has only increased since my letter last year, I ask for responses to the following questions by Thursday, May 18, 2023:

1.       Can the IRS provide state-by-state numbers of the current ERC backlog?

2.       Forms 941-X can only be submitted on paper as of now, which creates challenging both for taxpayers and the IRS.

a)      Is the IRS planning on allowing the e-filing of 941-X forms?

b)      Is the IRS planning to expand its digital scanning efforts to include scanning of Forms 941-X?

3.       During the Senate Finance Committee hearing on April 19, 2023, you stated that it was your hope that the IRS would be able to resolve 40,000 of the unprocessed ERC claims per week following the end of the 2023 tax filing season.

a)      Has the IRS reached the goal of resolving 40,000 of the claims per week yet? If no, when do you expect to reach that goal?

b)      Are additional staff needed to eliminate the backlog or do you find the current staffing levels adequate?

c)       Can you provide Congress semimonthly updates on the IRS ERC backlog until the backlog reaches under 10,000 in total?

Thank you for your attention to this matter and I look forward to your response.