When Will I Receive My Employee Retention Credit Refund?

Regardless of whether you already filed for Employee Retention Credit refund or are still considering this valuable tax credit, you’re probably wondering how long the entire process will take. 

Due to the unfortunate circumstances of the 2020 Covid-19 pandemic, many businesses have suffered great losses and are still recovering from the aftermath. In a sense, many people are counting on this source of income to cover their expenses.

However, due to extensive backlogs and delays in the refund process, many have reported that their Employee Retention Credit refund took too long to arrive. This can be tough for those who have already budgeted for it and are fearing foreclosures and evictions. 

Continue reading to learn more about how long to receive an Employee Retention Credit refund, how it works, and how you can check your Employee Retention Credit refund status.

What is the Employee Retention Credit?

In simplest terms, the Employee Retention Credit is a refundable tax credit for qualified wages paid out to employees between March 2020 and January 2021. The credit applies to both federal income tax withholding and employment taxes. 

The idea behind this tax credit is to support businesses that retained employees on the payroll even while they were shut down during the pandemic. 

Although the lockdown days are far behind us, you can still claim this tax credit retroactively by amending your return to receive a refund check. More precisely, for wages paid out during 2020, you have until April 15, 2024, while for 2021, the deadline is April 15, 2025.

The best thing about the Employee Retention Credit is the fact that it’s based on payroll, rather than income taxes, meaning that it’s possible to receive a refund even if you haven’t paid any income taxes in the eligibility period (2020 and 2021).

Furthermore, since the credit is also refundable, you can receive an amount higher than the original amount you paid in taxes. For example, if you qualify for $50k but only paid $10k, you will still receive the full refund. 

If you want to learn how to amend your previous tax returns and apply for the Employee Retention Credit, we have a blog post that goes into great detail.

How to check your Employee Retention Credit refund status

For those who are awaiting (and are yet to file), it’s useful to know more about checking the Employee Retention Credit refund status. 

One of the ways is contacting the IRS directly by calling the IRS helpline at 1-800-829-1040. Before dialing the grand old bureau, make sure you have your Social Security number at hand, as well as your tax return information and employer identification number (EIN).

Supply all the necessary info to the person on the other side of the line, and within four weeks, you’ll receive a notice about your Employee Retention Credit refund status. If the notice doesn’t arrive within that time frame (you’re dealing with the government, after all), you can file a Claim for Refund of Excise Taxes, more commonly referred to as Form 8849.

Keep in mind that once you file a return, you may not be able to expedite the review process. While calling the IRS may help you check the status of your refund, it won’t do anything to speed up the process. So, please refrain from pestering a governmental agency if the refund is taking too long. 

If you don’t want to talk to the IRS directly (basically everything a Millennial taxpayer would like to avoid), you can check the Employee Retention Credit refund status online using IRS’s Refund Status Tool. Follow the directions on the site to fill out the form properly - you’ll need the same information as if you were communicating with the IRS via phone. 

How long to receive Employee Retention Credit refund?

Legislative changes provided the opportunity for many businesses to retroactively claim this credit on amended payroll returns. Since these returns must be paper-filed and processed by hand by the IRS staff, it takes a long time to process everything promptly - especially when receiving hundreds of thousands of individual pieces of paper. 

On average, how long to receive Employee Retention Credit refund will vary from case to case. When the program started, it took only as many as six weeks for the refund to arrive (or as little as four weeks). Today, there is a massive backlog of claims that need to be processed, which means that most businesses receive the Employee Retention Credit check anywhere between six months to a year from the filing date. 

It’s a bit more complicated once you scratch the surface, though. 

What do we mean by that? Larger refunds will take a lot longer to process than smaller ones.

For instance, if you’re expecting a refund of between $1k and $250k, your check may take 3 to 10 months to arrive. Naturally the lower the amount, the faster your return will be processed.

On the other end of the spectrum, if you’re expecting an amount over $250k, it may take over a year to process your return and transfer the funds. 

The wait is worth it

Yes, the processing time seems excessive, which can be a total drag if you’re expecting a fast cash infusion. Still, this tax credit is very valuable so don’t let the longer wait times discourage you from applying. 

The only thing you can do to potentially expedite the process is to see to it that you file everything correctly, which can be challenging, depending on the circumstances.

Fret not, as you have options if you seek help - attorneys at Jostock & Jostock are experts in all tax-related matters, including the Employee Retention Credit refund. 

We have a deep knowledge of all the complex legislation involved in this tax credit and can help optimize your return to yield even better financial results. With our keen eye for detail and knowledge of taxes, we may be able to discover whether you’re eligible for additional quarters in which your drop in revenue didn’t seem substantial enough. 

Fill out our contact form or call (239) 500-8822 and rest easy while professionals are working on your tax credit!

Note: 

The information in this blog post is for reference only and not legal advice. As such, you should not make legal decisions based on the information in this blog post. Moreover, there is no lawyer-client relationship resulting from this blog post, nor should any such relationship be implied. If you need legal counsel, please consult a lawyer licensed to practice in your jurisdiction.