NAPEO SOUNDS ALARM AS IRS ERTC BACKLOG NOW TOPS ONE MILLION

Small and Mid-Size Businesses Face Additional Loans, Layoffs, and Closure Due to IRS Delay

ALEXANDRIA, Va., May 2, 2023 /PRNewswire/ -- The ballooning backlog of Employee Retention Credit (ERTC) applications reached a grim milestone last week, despite recent commitments from IRS Commissioner Daniel Werfel to double efforts to get small and mid-sized businesses this vital money.

According to the IRS, the backlog of outstanding Forms 941-X —the application used by small businesses to claim the ERTC— now tops one million, a 641% increase since August. The nearly ten-fold increase reflects a once-modest logjam that has now spiraled out of control.

"This staggering figure indicates the true severity of this crisis," said National Association of Professional Employer Organizations (NAPEO) President and CEO Pat Cleary. "Businesses who did the right thing by keeping staff on payroll during the pandemic are now paying the price for the IRS' inexcusable delay."

The one million figure marks a 33% increase since March, even as Werfel recently told the Senate Finance Committee and House Ways and Means Committee his agency will redeploy staff to double the processing rate to 40,000 applications per week. Sen. Mark Warner (D-VA) noted this on-the-record testimony, adding that he will hold Werfel accountable to the revised figure.

A sampling of only 15% of NAPEO members found that 13,631 small business PEO clients are waiting for the IRS to approve roughly $3 billion worth of ERTC credits. Some companies have waited more than two years for that needed money to arrive. And as that figure continues to rise, the backbone of our economy continues to languish.

Small and mid-sized businesses across the country have reported taking on new high-interest loans, making personnel cuts, and in some cases, closing their business altogether after waiting for hundreds of thousands of dollars in ERTC money that never came.

To draw attention to this ongoing emergency, NAPEO and its members have sent more than 400 letters to members of Congress, including leaders of the House and Senate Small Business committees. NAPEO, PEOs, and small business PEO clients remain in active communication with lawmakers and regulators to clear this backlog. NAPEO members will be pressing their case on Capitol Hill on May 23.

"We will continue to beat the drum until small and mid-sized companies receive their money and the backlog is zero," Cleary said.

About NAPEO – The Voice of the PEO Industry™
NAPEO's 250 PEO members provide payroll, benefits, workers' comp, regulatory compliance assistance, and other HR services to more than 173,000 small and mid-size businesses employing 4 million people. Our members account for more than 90 percent of the industry's $270 billion in revenue. An additional 250 companies that provide services to PEOs are associate members of NAPEO. For more information, please visit www.napeo.org.

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SOURCE National Association of Professional Employer Organizations (NAPEO)