House Republicans push IRS for answers on processing pause for small business tax credit

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Rep. Jason Smith, R-Mo., speaks during a House Oversight and Accountability Committee impeachment inquiry hearing into U.S. President Joe Biden on Sept. 28, 2023.

Jonathan Ernst | Reuters

House Republicans are pressing the IRS for answers after the agency paused processing new claims for a pandemic-era small business tax break.

Lawmakers voiced “continued concerns” about the employee retention credit, or ERC, which was enacted to support small businesses during the Covid-19 pandemic. Worth thousands per employee, the credit sparked a flood of amended returns, many of which were wrongly filed after bad advice from specialist firms.

In a letter to the IRS on Tuesday, House Ways and Means Committee chair Jason Smith, R-Mo., and Oversight Subcommittee chair David Schweikert, R-Ariz., asked for updates on the backlog of unprocessed ERC claims.

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“For a program that has been plagued with a prolonged backlog, it remains to be seen what changes will be made during the moratorium to improve vetting measures for fraudulent claims while also making the processing time more efficient to lessen the backlog,” they wrote.

The letter asked several questions about the ERC program, including the number of unprocessed claims, a timeline to clear the backlog, plans to improve processing for legitimate filings and more.

The IRS did not immediately respond to CNBC’s request for comment.

The backlog of unprocessed ERC claims

As of Sept. 27, the total inventory of unprocessed Forms 941-X, used to amend an employer’s quarterly federal tax returns, was roughly 779,000, according to the IRS.

However, the ERC claim backlog may be significantly higher due to professional employer organizations, or PEOs, which provide payroll benefits and other HR services. The backlog of unprocessed ERC claims

According to the IRS, as of Sept. 27, the total inventory of Forms 941-X, used to amend an employer’s quarterly federal tax returns, was approximately 779,000. However, the ERC There are a lot of small businesses that are waiting for money. “

In July, the IRS said that it was slowing processing ERC claims because of “complexity” of the amended return and the increase in companies that lured small businesses who were not eligible to claim the credit. The IRS knows who we are,” said Cleary, who urged the agency to separate PEO claims from the backlog of questionable claims. “