Due to widespread delays, confusion over eligibility, and fraudulent claims that have plagued the Employee Retention tax Credit (ERC) since it was enacted last year, the House Ways and Means Oversight Subcommittee held a hearing on employers’ experiences with the program. 

The overall sentiment from both Republican and Democratic subcommittee members was the expectation that the hearing would put additional pressure on the IRS to make solving the ERC problems a top priority for the agency.  IRS Commissioner Daniel Werfel has publicly acknowledged the problems associated with the ERC and feels the agency is making “substantial progress” on both the backlog of claims and increased scrutiny on “dubious submissions” and “warning consumers against aggressive marketing.” 

The ERC was created and extended in pandemic stimulus bills to assist employers who had to suspend services partially or fully or who experienced significant revenue loss as a result of the national COVID emergency.  It was available through the 3rd filing quarter of 2021 and was eliminated for the 4th quarter and beyond as part of the American Rescue Plan.

Employers across the country, including colleges and universities, have seen significant delays in receiving the credit due in large part to the paper-filing requirement of amended returns.  Although electronic returns are also delayed.  In addition, there are numerous fraudulent advertisements by groups claiming that the ERC is still available and targeting employees with promises of gaining access to funds for a fee.  These filings are also clogging the system and adding processing delays.

Ways and Means Chairman Jason Smith (R-MO) and Oversight Subcommittee Chairman David Schweikert (R-AZ) focused on the problems with the administration of the credit and the role and responsibility of the IRS.  The subcommittee discussed the backlog of claims still outstanding, the fraudulent ads, third-party servicers filing claims for individuals and employers who don’t meet the qualifying criteria, and the lack of guidance from the IRS.

Witnesses included financial advisors, and representatives for both corporate and nonprofit employers.  All had similar concerns with the IRS’s ability to process these claims and get funds to employers who struggled to keep employees on the payroll and execute operations during the pandemic.  Earlier this year, NAICU urged the IRS to assist the many private, nonprofit colleges and universities that have been waiting months, or even a year or more, for much needed funds expected from ERC claims.  Many schools need these funds to offset significant expenses as they continue to recover from the financial strains of the pandemic, and the long delays are leading to quarterly budget shortfalls and emergency financial reorganization.