Where’s My Tax Credit? The Status of Your 941-X Form and ERC Refund

The employee retention credit (ERC) is one of the updated tax laws that came into being as a result of the CARES Act in the beginning of the COVID crisis of 2020. The purpose behind this new tax break was to make keeping employees on the payroll a more attractive idea to business owners that might otherwise decide to lay off their employees or close down their business entirely.

This has been a successful program and it has advocates all the way up to President Biden himself. It’s been so popular that there is a substantial backlog of 941-X forms that the IRS is desperately trying to get through. While there are certainly other factors that has led to this backup.

If none of this is news to you and you’re wondering when the IRS is going to get you the promised tax credit, keep reading, I’m going to outline the situation and give the most up to date information available. I’ll also give some details about the 941-X form so when you hear someone mention it, it doesn’t just sound like the name of Marvin the Martian’s spaceship.

If this is all news to you, you’re either not a business owner and I have no idea why you’re still reading this, or you’re someone who hasn’t taken advantage of this generous tax break yet. If you’re in the latter group, I highly suggest you check out my earlier article on the ERC to see if this is something you and your business could potentially benefit from; in many cases business owners will find that this tax break is something that applies to them, and could save them money at the same time allowing them to keep employees at work.

Many business owners have told themselves that they’d look into a certain program, only to let it slip through their hands and miss out on the opportunity to save money. In the case of the PPP program, some people simply passed up free money  during a very challenging period. If this is making you squirm because it’s ringing a little too true for your liking, that’s not my intention. I’m just trying to frame a complicated situation in the simplest possible terms so you’re able to call something a learning experience instead of a repeated mistake.

On a positive note, let’s get into the latest information about where your tax credit is!

When Am I Getting My ERC Tax Credit?

Your refund is coming, albeit very slowly. Due to reduced staff, outdated technology, and being tasked with handling and implementing a fury of new programs, rebates, and stimulus payments that it had no prior experience with, the IRS is bogged down in ways unimaginable only 18 months ago.

It’s not all bleak, the good news is that the IRS has recently claimed it has returned to processing forms at its pre-COVID rates, something that any business owners should be overjoyed to hear. Returning to their peak form notwithstanding, there is a glut of to-do piles for the bureau (I know it’s called the Internal Revenue Service, but it’s technically a bureau of the Department of the Treasury) that is going to take, and has taken, far longer than normal

The bureau has recently acknowledged that it has over 100,000 941-X forms that it has yet to process as of May 6, 2021. Beyond that, there are more than 200,000, 941 forms from the 2020 financial year or earlier that still require processing before their associated 941-X can be processed. They can’t simply cut you a check without first verifying that they owe you and not the other way around.

As if that wasn’t enough to hear, then there’s the new filings that have poured in. This has required the IRS to split their time between the backlogged forms and the 1.7 million Form 941’s they’ve received for the first quarter of the 2021 financial year.

Is Anybody Out There? What’s Being Done About Delayed ERC Refunds?

The IRS is aware of the situation, and even Congress has jumped in to point out the unacceptable nature of making business owners wait for refunds that are rightfully theirs.

On March 18 of 2021, there was a House Ways and Means Subcommittee on Oversight hearing with IRS Commissioner Charles Rettig in which Mr. Rettig acknowledged the situation faced by small-business owners as they endured excessively long wait times to receive their tax credits associated with the ERC. Representative Mike Kelly, the Subcommittee’s ranking Republican member, opened the hearing by expressing his concern that while the ideas behind policies like the ERC are great, they’re worth nothing if the intended beneficiaries don’t get the money they need, and are owed. Rep. Kelly continued on, noting how his constituents in Pennsylvania’s 16th district had been and were continuing to reach out to him asking when they could expect to receive the money they had been promised by the provision of the CARES act. He noted one local small-business by name that had been waiting since April of 2020, and added that business owners couldn’t wait forever.

Commissioner Rettig acknowledged his bureau’s shortcomings and while responding to another Representative later in the hearing, he stated that the IRS was looking into options as to how they can expedite the backlogged ERC payments. He noted that many IRS employees come from small-business backgrounds, and that “we get it.” Strangely, hearing someone speak in such plain, vernacular English soothes my concerns and suggests to me that the Commissioner actually does get it.

Beyond this particular hearing where it was apparent that business owners’ concerns were not falling upon deaf ears, the IRS has stated that is shifting the workload from locations that are overwhelmed to offices with greater staffing resources so they’ll be able to cut the glut of 941’s and 941-X’s down to size.

What Can I Do to Speed Up Getting My ERC Refund?

Sadly, nothing. There are things you can do to make it more complicated, or difficult for yourself, and I strongly encourage you not to do either of the following

  1. Call the IRS
  2. Refile any form you have previously filed

According to a Washington Post article, the odds of reaching a human being when calling the IRS is 2%. Even if you are the 1 in 50 that get through, the likelihood that you will get any resolutions from that call is probably closer to 1 in 100,000.

Refiling could make things even worse by creating a situation where the IRS is trying to determine if they’ve done something wrong.

The best thing you can do is be patient, and make sure that you stay abreast of all your current tax, payroll, and other business-related financial files so you’ll be able to get a jump on any future situations.

What Is Form 941-X ?

The 941-X is the form that allows business owners to claim a refund on the quarterly taxes they have paid. This is the form you need to file in order to claim the tax credits available through the ERC.

Besides anything related to the ERC, this form is also used to claim other refunds or otherwise amend quarterly tax payments that you already paid.

Are Form 941 and 941-X Different?

Yes, they are different. Form 941 is what you’re required to file in order to pay your quarterly taxes, and Form 941-X is what you file if you need to adjust the amount you paid.

Don’t mix the two up, as you’ll create confusion for yourself as you try to get the tax credits you’re entitled to. The IRS has so many different forms, that it’s not difficult to forget which form corresponds with a particular intent, particularly when they’re almost identically named.

As someone who is responsible for paying his own taxes as an independent contractor (Form 1099), I always err on the side of caution and trust my taxes to financial professionals. Whatever money I think I’m going to save by doing it myself ends up being time I’m not generating income, usually resulting in a net loss to my bottom line. Add on top of that the stress that comes from situations like this ERC debacle where business owners get no news from the IRS, are worried every day that they must have done something wrong and it’s only a matter of time before they’re going to get hit with huge penalty notice

Can I File My Form 941-X Online?

No. Unfortunately, currently the only option is to print, ink, and mail your Form 941-X to the IRS the old fashioned way. Hopefully the IRS upgrades its digital capacity in the years going forward but as it stands now, this is not one of the forms they can accept online.

This adds to my position that it’s best to ask whoever provides your accounting services to handle this on your behalf. It’s not that they’re doing some sorcery in a language I don’t speak, it’s simply that they have a wealth of experience in this department, and the likelihood of me making an error is far greater than them.

As an independent contractor currently, and as a small business owner in the not so distant past, I can speak from experience when I tell you: The government loses paperwork just like every other person on Earth. I have been on the phone with offices in Trenton where they simply told me “yeah, we don’t have your application/form/document,” and were completely unphased by my telling them I had a return receipt from the USPS saying they did have it. Having another layer of certification that it was in fact filed and documentation to prove it might be the difference between stress and relaxation.