Today, U.S. Senator Kirsten Gillibrand is calling on Internal Revenue Service (IRS) Commissioner Charles P. Rettig to expedite and clear the backlog of unprocessed Employee Retention Credit (ERC) payments that were passed and guaranteed in the CARES Act in March of 2020. The ERC credit was created to help struggling businesses in urgent need of assistance due to economic disruptions during the COVID-19 pandemic. Specifically, disbursement of the ERC credit would ensure businesses receive funding in the form of a payroll credit to encourage businesses owners to retain employees and help offset the cost of lost revenue and rising inflation. These payments are especially needed for small and mid-sized businesses that have suffered massive financial losses due to reduced demand and supply chain disruptions. Gillibrand is also calling for the IRS to clear the significant backlog of individual income tax returns so that individuals and families can receive their Child Tax Credit, UI related refunds, Earned Income Tax Credit, and other payments in a timely manner.
“I have heard from constituents across New York and the message is clear – after two years of grappling with financial hardship caused by the pandemic, businesses are in dire need of this assistance through the ERC credit. We did our part in Congress, now it’s time for the IRS to deliver,” said Senator Gillibrand. “When Congress passed this funding as part of the CARES Act, businesses were assured they would receive immediate and direct assistance in the form of a payroll credit to help keep Americans employed and operations running during this difficult time. I’m calling on the IRS to hear the needs of these business owners and to do everything in their power to deliver this already-passed money swiftly and efficiently.”
“The Employee Retention Credit is money that has already been funded by Congress. The problem is small businesses are waiting many months for these refunds to be disbursed by the IRS,” said Rosina Rubin, CFO of Attitude New York chauffeured transportation. “This money is vital to struggling small businesses that are trying to rebuild and create good jobs, and I applaud Senator Gillibrand for her efforts to assist New Yorkers at this critical time.”
“Restaurants in New York City and around the country have been devastated by the COVID-19 pandemic, and the federal government’s Employee Retention Credit was intended to provide critical relief to struggling small businesses. Unfortunately, too many restaurants and bars have been waiting way too long to receive the employee retention credit they’re owed by the IRS, which is posing significant financial burdens because they were relying on this money help to pay rent, keep people employed and to help keep their doors open. We thank Senator Gillibrand for her support, and we look forward to working with her and the IRS to expedite sending these checks to businesses that are desperately in need,” said Andrew Rigie, Executive Director, NYC Hospitality Alliance
“Tax preparers are commonly seeing refund timelines of 24 – 26 weeks due to delays in IRS processing of amended payroll tax filings claiming the employee retention credit. In addition, IRS guidance suggests taxpayers should reduce their income tax deduction for wages by the amount of employee retention credits and this adjustment should be made in the year the wages were paid. Because this adjustment essentially raises taxable income in the year wages were paid it results in many taxpayers effectively paying tax on the amount of the credit before their tax refunds have even been received by the IRS. For example, if a taxpayer claimed employee retention credits for 2021 Quarter 3 of $50,000, current guidance suggests the $50,000 would lower the taxpayer’s wage deduction for tax year 2021. Many taxpayers are still waiting to receive their tax refunds related to 2021 Quarter 3 employee retention credits due to the extended refund timelines. Several clients have point out that reporting taxable income, and paying tax, related to this required wage adjustment before receipt of the actual employee retention credits is not fair,” said Andrew L. Moore, CPA, Gettry Marcus
For the full letter, please click here and below.
Dear Commissioner Rettig,
I write today to urge the Internal Revenue Service to take immediate action towards clearing the backlog of unprocessed Employee Retention Credit (ERC) payments. I have recently heard from constituents that have yet to receive credit 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 it is important that ERC refunds are sent out with similar urgency.
I understand that the processing delay 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. This requirement to file paper forms to receive an ERC refund is particularly disappointing given the fact that paper returns are generally subject to longer processing times than electronic returns.
I realize the challenge the COVID-19 pandemic has presented to your agency, both with staffing shortages and additional work brought on by new provisions like the ERC. I am aware that there is also a significant backlog of individual income tax returns that need to be processed, and it is important that clearing that backlog remains a priority so that individuals and families can receive their Child Tax Credit, UI related refunds, Earned Income Tax Credit, and other payments in a timely manner. I hope the IRS can also take steps to support employers by taking action to clear the ERC refund backlog and getting checks into the hands of business owners in New York and across the country.
Thank you for your attention to this matter and I look forward to your immediate action.