The latest IRS data shows that it had 1,057,000 unprocessed Forms 941-X as of December 9, 2023. Most of those forms are likely Employee Retention Credit (ERC) refund claims. That number is certainly understated, as IRS Commissioner Danny Werfel told the United States Senate Committee on Finance in mid-April that the IRS was still receiving an average of about 20,000 ERC refund claims per week. Assuming that pace continues today and that the IRS was receiving the same average number of claims per week since it last updated the publicly available data in December, would mean that the IRS has received about another 400,000 claims, putting the total unprocessed ERC refund claims somewhere around 1.5 million.

Commissioner Werfel also told the Senate Finance Committee that the IRS has already “processed about 3.6 million ERC claims worth approximately $230 billion to businesses,” which is about $64,000 per claim. If the estimated 1.5 million claims pending is in the ballpark and those claims average about the same $64,000 as those already processed, the remaining unprocessed claims total roughly another $96 billion. That number is full of assumptions and certainly is not precise, but it does give some indication of the magnitude of unprocessed claims.

On September 15, 2023, the IRS announced a moratorium on processing new ERC refund claims due to the IRS’ “concerns about a flood of improper” claims. While the IRS has continued to process claims that were filed prior to that date, its work has dramatically slowed. The agency has not committed to any specific timeline for lifting the moratorium.

What is the IRS going to do with all of the unprocessed claims? Nobody outside the IRS knows for sure, but many practitioners and taxpayers are imploring the agency to move more quickly. Chuck Rettig, the IRS’ immediate past Commissioner who now represents taxpayers in IRS matters as a shareholder at the law firm Chamberlain Hrdlicka, told me, “The IRS should not indefinitely continue the moratorium on processing ERC claims. The IRS ERC voluntary disclosure program has had success in certain taxpayers voluntarily rescinding a significant amount of ERC claims. However, there are numerous claims that have been submitted by eligible businesses that are continuing to struggle financially. Many have secured and are struggling to service loans from family, friends and others. The IRS needs to appropriately balance the importance of renewing a review of submitted claims and distributing these funds to struggling eligible businesses versus erroneous and potentially fraudulent claims that have been submitted.” (In the interests of full disclosure, I am also a shareholder at Chamberlain Hrdlicka.)

Eric Hylton, a national director at alliantgroup and a former Commissioner of the Small Business and Self-Employed division of the IRS, expressed similar sentiments. He told me, “The IRS’ holistic ERC compliance strategy has had a significant impact in mitigating fraud and improper claims, however the continual delay of the processing ERC claims based on the moratorium poses significant concerns for the financial health of businesses that complied with the eligibility criteria and anticipated these crucial funds.”