Processing Delays Lead to Pandemic Business Relief Holdups

According to the Treasury Inspector General for Tax Administration, some businesses are still waiting for pandemic relief due to ongoing processing delays at the Internal Revenue Service.

According to an August 31, 2022, report posted to the TIGTA web site, the IRS “did not begin processing claims for qualified Sick and Family Leave Credits and the Employee Retention Credit for 12 months and claims for the Social Security Tax Deferral for 16 months after the pandemic relief legislation was enacted.”

TIGTA attributed this delay to a “lack of updated programming and procedural guidance,” as well as a “lack of training, erroneously suspended claims, and a lack of prioritization of claims” that led to delays in processing claims.

This is an ongoing challenge for the IRS. “As of February 1, 2022, there were 447,435 Forms 941-X waiting to be processed,” the report states. “Over 90% (402,814) of these Forms 941-X were over-aged, meaning they have not been processed within 45 calendar days. In addition, 13.6% (60,885) of the Forms 941-X were not processed within 180 calendar days.”

Additionally, the IRS watchdog found claims that should have been reviewed but were not resulted “in $45 million in potentially erroneous nonrefundable employer tax credits being allowed” when they otherwise might not have had proper reviews been conducted.

TIGTA recommends the IRS develop a plan to prioritize processing backlogged claims, update the examination referral process, and update training for IRS employees regarding referrals. IRS did not agree with the latter recommendations, but did all others stated in the report.

“Management stated they completed subsequent review of completed Form 941-X claims and determined no additional training was needed,” the report states. “However, the IRS’ subsequent reviews do not address the concerns identified in our report. Accounts Management employees cited unclear guidance and training as to why 73 percent of claims were not referred when required.” I guess we’ll see how this shakes out while waiting for pandemic relief.

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