[US] Payroll tax credit to small businesses delayed by IRS backlog

In the US, the Internal Revenue Service (IRS) has been working towards clearing a backlog that has left employers waiting as long as six to 10 months to process claims for the Employee Retention Tax Credit, a measure designed to maintain workers on the payroll during the pandemic, Repairer Driven News reports.

The Employee Retention Tax Credit (ERTC) was passed by Congress in 2020 as a companion to the Paycheck Protection Program [PPP]; a way to help small businesses affected by COVID-19 to hold onto their W-2 employees.

The Government Accounting Office (GAO) found that the IRS had begun missing its statutory 90-day deadline for handling claims in September 2020 and continued to miss it throughout 2020.

According to Forbes reporting, the IRS entered the current tax season “severely backlogged and shorthanded” as a result of the pandemic. The agency was further “overwhelmed by the quantity of COVID relief Congress gave out through the tax code,” Nina E. Olson - a tax lawyer and the founder and executive director of the Center for Taxpayer Rights - told Forbes.

According to the Journal of Accountancy, IRS Commissioner Charles Rettig has told members of the House that the agency will process its backlog of unprocessed work - some of which dates back to 2020 - by the end of 2022. When asked directly about ERTC, Mr Rettig offered no details, the report said.

Acting Committee Chair Representative Judy Chu - the acting House Ways and Means Committee’s Subcommittee on Oversight - highlighted the IRS’s recent implementation of “surge teams” of employees reassigned to its accounts management and submission processing functions and asked Mr Rettig directly whether the backlog would be cleared by December.

“Absolutely before December,” Mr Rettig said. “As of today, barring any unforeseen circumstances - COVID, etc., etc. - but if the world stays as it is today, we will be what we call ‘healthy’ by the end of calendar year ’22 and enter the ’23 filing season with normal inventories.”

The delays and changes in federal policies are forcing employers experiencing delays in their claim for the employee-retention tax credit to “dig deeper into reserves and slowing their recovery,” a Wall Street Journal report said.

Thomas Bemiller - CEO of The Aureus Group, the owner of three collision repair shops in the Philadelphia area - told the Journal that the company has received a partial $180,000 ERTC refund but is waiting for more for both 2021 and 2021.

Mr Bemiller told the WSJ that Aureus incurred credit card debt and other bills to keep the business running during the pandemic. “When the money showed up, it was a little bit of a surprise,” he said. “Because it took so long, I wasn’t waiting on it every day.”

Repairer Driven News asked Brad Mewes - chief financial officer of The Mewes Group - what advice he would offer body shops that have filed claims for the tax credit or are considering doing so.

“Make sure as a client you understand the process. We have a specific three-step process we go through with every client that we outline at the beginning of every job,” Mr Mewes said. “Don’t pay the entire fee upfront (we work on a contingency basis). As a result, we’ve created a process that gets these in cue at the IRS within days rather than weeks or months. And seek out specific experience with these credits.”

“Don’t assume your accountant has this covered,” Mr Mewes added. Filing a claim requires a thorough understanding of payroll tax, rather than income tax, and familiarity with hundreds of pages of IRS documentation on PPP and ERTC and how the programs interact.

Anyone who has filed and is waiting for payment might want to get a second opinion, Mr Mewes said. 

“Many of our clients tell us either their accountant said they didn’t qualify, or they filed for a few thousand when they should have filed hundreds of thousands (or millions) because their accountant didn’t read the hundreds of pages of guidance on the credits. Or worse, they file incorrectly, for the wrong periods, or are missing critical documentation.”

Mr Mewes highlighted the importance of hiring a firm that can do legal research, “We’ve filed for hundreds of companies, many in the auto body business; many of whom increased sales during the pandemic.”

And he cautioned companies not to delay, “Congress already retroactively repealed portions of the credit.”

The National Federation of Independent Businesses can help people contact their representatives and ask them to extend the credits until the end of 2021, as originally intended. Further information is available here.

Source: Repairer Driven News

(Links and quotes via original reporting)

In the US, the Internal Revenue Service (IRS) has been working towards clearing a backlog that has left employers waiting as long as six to 10 months to process claims for the Employee Retention Tax Credit, a measure designed to maintain workers on the payroll during the pandemic, Repairer Driven News reports.

The Employee Retention Tax Credit (ERTC) was passed by Congress in 2020 as a companion to the Paycheck Protection Program [PPP]; a way to help small businesses affected by COVID-19 to hold onto their W-2 employees.

The Government Accounting Office (GAO) found that the IRS had begun missing its statutory 90-day deadline for handling claims in September 2020 and continued to miss it throughout 2020.

According to Forbes reporting, the IRS entered the current tax season “severely backlogged and shorthanded” as a result of the pandemic. The agency was further “overwhelmed by the quantity of COVID relief Congress gave out through the tax code,” Nina E. Olson - a tax lawyer and the founder and executive director of the Center for Taxpayer Rights - told Forbes.

According to the Journal of Accountancy, IRS Commissioner Charles Rettig has told members of the House that the agency will process its backlog of unprocessed work - some of which dates back to 2020 - by the end of 2022. When asked directly about ERTC, Mr Rettig offered no details, the report said.

Acting Committee Chair Representative Judy Chu - the acting House Ways and Means Committee’s Subcommittee on Oversight - highlighted the IRS’s recent implementation of “surge teams” of employees reassigned to its accounts management and submission processing functions and asked Mr Rettig directly whether the backlog would be cleared by December.

“Absolutely before December,” Mr Rettig said. “As of today, barring any unforeseen circumstances - COVID, etc., etc. - but if the world stays as it is today, we will be what we call ‘healthy’ by the end of calendar year ’22 and enter the ’23 filing season with normal inventories.”

The delays and changes in federal policies are forcing employers experiencing delays in their claim for the employee-retention tax credit to “dig deeper into reserves and slowing their recovery,” a Wall Street Journal report said.

Thomas Bemiller - CEO of The Aureus Group, the owner of three collision repair shops in the Philadelphia area - told the Journal that the company has received a partial $180,000 ERTC refund but is waiting for more for both 2021 and 2021.

Mr Bemiller told the WSJ that Aureus incurred credit card debt and other bills to keep the business running during the pandemic. “When the money showed up, it was a little bit of a surprise,” he said. “Because it took so long, I wasn’t waiting on it every day.”

Repairer Driven News asked Brad Mewes - chief financial officer of The Mewes Group - what advice he would offer body shops that have filed claims for the tax credit or are considering doing so.

“Make sure as a client you understand the process. We have a specific three-step process we go through with every client that we outline at the beginning of every job,” Mr Mewes said. “Don’t pay the entire fee upfront (we work on a contingency basis). As a result, we’ve created a process that gets these in cue at the IRS within days rather than weeks or months. And seek out specific experience with these credits.”

“Don’t assume your accountant has this covered,” Mr Mewes added. Filing a claim requires a thorough understanding of payroll tax, rather than income tax, and familiarity with hundreds of pages of IRS documentation on PPP and ERTC and how the programs interact.

Anyone who has filed and is waiting for payment might want to get a second opinion, Mr Mewes said. 

“Many of our clients tell us either their accountant said they didn’t qualify, or they filed for a few thousand when they should have filed hundreds of thousands (or millions) because their accountant didn’t read the hundreds of pages of guidance on the credits. Or worse, they file incorrectly, for the wrong periods, or are missing critical documentation.”

Mr Mewes highlighted the importance of hiring a firm that can do legal research, “We’ve filed for hundreds of companies, many in the auto body business; many of whom increased sales during the pandemic.”

And he cautioned companies not to delay, “Congress already retroactively repealed portions of the credit.”

The National Federation of Independent Businesses can help people contact their representatives and ask them to extend the credits until the end of 2021, as originally intended. Further information is available here.

Source: Repairer Driven News

(Links and quotes via original reporting)