Understanding ERC Refund Delays
The Employee Retention Tax Credit (ERTC) was designed to provide financial relief to businesses impacted by the COVID-19 pandemic. However, many businesses have been left waiting months—or even years—for their refunds. The IRS is overwhelmed, and the backlog of unprocessed claims continues to grow. If you’re wondering how to expedite your ERC refund, this guide will walk you through your options.
Why Is Your ERC Refund Delayed?
1. The IRS Has No Obligation to Process Your Claim Quickly
Unlike tax returns, which have defined processing deadlines, the IRS has no legal requirement to process ERC claims within a certain timeframe. According to 26 U.S.C. § 6532(a)(1), the IRS is not obligated to act on your refund request promptly. This means they can ignore your claim indefinitely without penalty.
2. IRS Staffing and Resource Issues
Under the Trump Administration, the Department of Treasury underwent significant downsizing, leaving the IRS with even fewer resources to handle ERC processing. Additionally, the IRS is currently without a permanent Commissioner to oversee the agency, further contributing to administrative inefficiencies. With limited staffing and no clear leadership, the backlog of ERC claims continues to pile up, leading to extensive delays for businesses awaiting their refunds.
3. The IRS’s Strategy: Delay and Deny
The IRS assumes that a large percentage of ERC claims are fraudulent. As a result, even legitimate claims face excessive scrutiny and processing delays. The agency’s best strategy is to delay claims as long as possible, effectively “waiting out” businesses in hopes that they will give up or fail to take legal action.
How to Expedite Your ERC Refund
File a Lawsuit Against the IRS
As such, Brotman Law has begun to recommend that its clients consider judicial action against the IRS in federal court to demand payment of their Employee Retention Tax Credit. Our firm anticipates initiating hundreds of suits in federal court on behalf of our clients.
What Does Judicial Action Against the IRS Mean?
Suing the IRS, either in your local district court or in the Federal Court of Claims (a specialized court dedicated to claims against the government), may sound intimidating. Many people worry that taking legal action against the government could lead to scrutiny or retaliation, but this is not the case.
When you sue the IRS, you are essentially removing your ERC claim from the hands of the IRS and placing it before a neutral federal judge. The IRS itself does not handle these cases in court—claims against the IRS are managed by the Department of Justice’s Civil Tax Division, which is also a neutral party.
The primary benefit of ERC litigation is that it ensures your case will be reviewed and resolved within a set timeframe. Rather than waiting indefinitely for the IRS to issue you your ERC refund, judicial action forces a resolution, guaranteeing that your claim will be addressed and your ERC refund processed sooner than if you remain stuck in administrative limbo.
Why Litigation Is the Best Option
- Forces the IRS to respond – Once an ERC lawsuit is filed, the IRS cannot continue to ignore your claim. The legal process compels them to take action, ensuring that your case moves forward rather than remaining stagnant in administrative delays.
- No risk of retaliation – Many business owners worry about retaliation from the IRS if they take legal action. However, ERC lawsuits are handled by the Department of Justice’s Civil Tax Division, not the IRS itself. This means that your case is reviewed by an independent legal body, eliminating any fear of unfair treatment.
- Potential for settlement – A significant number of cases settle before reaching trial. The IRS, facing the prospect of litigation, often chooses to resolve disputes quickly rather than engage in prolonged court battles. This increases the likelihood that your ERC refund will be expedited through a settlement agreement.
- Courts are ruling against the IRS – Recent court decisions have favored businesses in ERC refund disputes, setting a strong precedent for successful outcomes. The judicial system is proving to be an effective recourse for businesses facing long delays, making litigation a strategic move for expediting your ERC refund.
Take Action Now
If your ERC refund is delayed, waiting isn’t a strategy. The IRS has no legal deadline to process your claim, and their lack of resources only exacerbates the issue. Litigation may be the most effective way to get the refund your business is entitled to. Contact a qualified tax attorney today to discuss your options and take the necessary steps to expedite your ERC refund.
Learn More About the Litigation Process
Want to understand the steps involved in suing the IRS for your ERC refund? Read our in-depth guide on The ERC Litigation Process: What to Expect When Suing the IRS to get a clearer picture of how legal action can help you secure your refund faster.
Contact us today to schedule a consultation and take the first step toward recovering your ERC refund.