Where is Your ERC Refund?
The IRS has publicly stated that it believes 80-90% of ERC claims are fraudulent. As a result, they are taking extreme caution when reviewing claims, even legitimate ones.
Here’s what’s happening:
- 1.4 million unprocessed claims are sitting in the IRS backlog.
- The IRS lacks the staff and resources to process claims quickly.
- The IRS is assuming most claims are fraudulent and subjecting them to extra scrutiny.
The reality? Waiting for the IRS to act is not a strategy. Businesses with large claims may remain in limbo indefinitely.
The IRS Has No Obligation to Process Your ERC Refund
One of the biggest misconceptions about the ERC refund process is that the IRS has a deadline to process claims. But under 26 U.S.C. § 6532(a)(1), the IRS can take as long as they want. If they choose to ignore your claim, you have no administrative recourse.
The government is banking on the fact that most businesses won’t take legal action. But you do have an option: filing a lawsuit.
How Filing a Lawsuit Forces the IRS to Act
If your ERC claim has been ignored or denied for six months, you have the right to file a lawsuit in federal district court or the Court of Federal Claims (26 U.S.C. § 7422). Litigation forces the government to respond to the actual merits of your ERC claim, rather than leaving it stuck in IRS limbo.
Why Lawsuits Work:
- It forces a resolution. Unlike the IRS administrative process, litigation guarantees your case gets heard.
- The DOJ handles the case, not the IRS. The Department of Justice (DOJ) Civil Tax Division handles tax cases, and they don’t have the same incentives to stall ERC claims.
- Judges and juries decide the outcome. The IRS no longer has full control over your refund.
- The government is settling cases. The DOJ lacks the resources to fight every claim, and many cases end in settlements.
Is Suing the IRS the Right Move for Your Business?
Not every business needs to file a lawsuit, but for those with large ERC claims ($250,000+), it can be the best path forward. Legal action may be the right choice if:
- Your ERC claim has been pending for six months or more.
- Your business was directly impacted by COVID-19 restrictions (e.g., revenue decline, operational disruptions).
- You have solid documentation to support your claim (financial records, payroll data, and business impact statements).
The Legal Process: What to Expect
If you decide to take legal action, here’s what the process looks like:
- Confirm Your Claim is Valid – Ensure your Form 941-X was filed correctly and on time.
- Wait Six Months from Filing – This is the minimum time required before filing a lawsuit.
- File a Lawsuit in Federal Court – This officially challenges the IRS’s inaction.
- Exchange Documentation – The government will review your claim and may propose a settlement.
- Negotiate a Resolution – Many cases are resolved before trial.
- Go to Court (If Needed) – A judge or jury will make the final decision.
Act Before It’s Too Late
The statute of limitations on ERC claims is closing fast. If your refund is stuck in IRS limbo, waiting is no longer an option. Filing a lawsuit could be the best way to get the money your business is entitled to.
Ready to take action? Our firm has helped hundreds of businesses file for ERC, and our controversy background makes us well equipped to handle ERC litigation. To learn more about firm and how we handle ERC lawsuits, visit our service page.
Contact us today for a free consultation and see if litigation is the right move for your business.