IRS Doubling ERC Filing
SOURCE: Warner.State.Gov | WASHINGTON – U.S. Sen. Mark R. Warner (D-VA) today pushed IRS Commissioner Danny Werfel to accelerate processing the backlog of Employee Retention Tax Credit (ERTC) claims. Commissioner Werfel asserted that the IRS is currently processing 20,000 ERTC claims per week, but after further questioning by Sen. Warner, committed to doubling the rate to 40,000 per week, with priority on the oldest claims.
The ERTC was created in response to COVID-19 to incentivize employers to keep their employees on payroll and off unemployment during the height of the pandemic. Virginia small businesses kept those promises to retain their workforce, but years later, due to IRS processing delays, many are still waiting to receive the tax credits they are due.
Sen. Warner has repeatedly raised this issue with the IRS, and today in a hearing of the Senate Finance Committee, he pressed Commissioner Werfel to commit to doubling the rate at which these credits are processed:
Sen Warner asked, “I want to drill down on two issues… The first is, and this was the call we had in late March, the Employee Retention Tax Credit (ERTC). And one of the things we put in place during COVID, again, a bipartisan piece of legislation, which I think was well intended to make sure that employers kept people on during COVID rather than having to put them on unemployment. As I shared with you, you know, there are a number of businesses in Virginia, and I imagine this is probably the case in other states as well, where there’s been a backlog. They can’t get clarity. They’re not getting these tax credits, which I think they did deserve. And since these are businesses that did, from a policy standpoint, what I think we all thought was the right thing by keeping folks employed during that period. Can you update us on the overall ERTC backlog and where we stand?”
Commissioner Werfel explained the factors that make processing ERTC claims difficult, then said, “The action is that now that filing season has ended, we now expect less of calls coming in, as most people have filed their taxes. And we can redeploy people off the phones and reset them so that we’re managing paper. Now, prior to this move of moving people off the phones, we were resolving about 20,000 of these Employee Retention Credits a week and using overtime and any downtime where the phones aren’t up, moving people to do it. Like every resource, it’s an all-hands-on-deck situation post this filing season. Now that we can reset the staff, I think we can maybe double per week the amount of refund of credits that we’re processing. So that’s the action that we’re taking. And in particular, I want to make sure and I’ve talked to the team about making sure that we go with the older ones first, like those that have been waiting the longest. So, you know, really focus on if it was received in 2022 or prior because they’re still coming in, and under the law they can come in until 2025. So this is a filing that we’re going to be dealing with for years, but I think we’re going to make progress.”
Sen. Warner said, “That was a great answer, and I also took away the fact that you’re going to double per week… How much of the backlog is being taken care of on a weekly basis at this point?”
Commissioner Werfel answered, “20,000 a week.”
Sen. Warner reinforced the answer and asked, “So we can look at 40,000 a week.”
Commissioner Werfel responded, “That’s the hope.”
Sen. Warner, “You just said it on the record, so I’m going to be back to you!”
Separately, Sen. Warner also pushed Commissioner Werfel in today’s hearing to maximize awareness of the tax benefit created by his bipartisan Employer Participation in Repayment Act, which allows employers to contribute $5,250 tax-free towards their employees’ student loans. The credit has been extended until 2025 and is currently available to help employers retain talent while borrowers pay down their debt.
While questioning Commissioner Werfel, Sen. Warner said, “You know, Section 127 of the code has something that has again been bipartisan, supported for years, which basically, as you’re aware, allows an employer to go ahead and send an employee back to school to get additional education. And that additional education up to $5,250 a year goes tax-free to the employee, great retention tool, great ability to get additional skills. One of the things and my friend John Thune and I put a bill in that got broad bipartisan support… that said… shouldn’t we also allow those employees who have student debt to go ahead and qualify as well and… pay down that $5,250 a year, tax-free. We had it put in place for a year. It got extended through 2025. It seems like such a no brainer. The take up rate has been not great. What can we do to help further promote? And this is an area where, regardless how we feel about student debt, you know, everybody’s kind of all in, and it’s a great retention tool.”
Sen. Warner has consistently pushed for faster processing of outstanding ERTC claims, including during a direct call to Commissioner Werfel in March, and has supported legislation to expand the program. He has also been a tireless advocate to improve IRS customer service and accelerate return times. Sen. Warner strongly supported the Inflation Reduction Act — legislation which provides funding to modernize IRS systems and improve customer service when paying taxes. This will help ensure the IRS has the resources it needs to process tax returns quickly, get rebates to taxpayers faster, and address challenges Virginians have when filing taxes. These investments have improved IRS response rates this tax season from answering two out of every 10 calls to answering nine out of every 10 calls.
Additionally, Sen. Warner has been pressing the IRS to address pandemic-related processing delays for several years. Sen. Warner first raised concerns over backlogs at the IRS in February 2021, as millions of Americans waited for delayed stimulus payments and processing of their tax returns. In January 2022, as the tax filing season opened, Sen. Warner again called on Treasury Secretary Janet Yellen and then-Commissioner Rettig to quickly address reports of unprocessed tax returns for the 2020 filing season. Later that month, Sen. Warner called on the IRS to provide relief for taxpayers amidst the backlog – a request he again reiterated in a bipartisan and bicameral March letter.
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