TIGTA Report 2022-46-059 — Delays Continue to Result in Businesses Not Receiving Pandemic Relief Benefits

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Summary

A final audit report of the Treasury Inspector General for Tax Administration, Report Number 2022-46-059, issued August 31, 2022 and transmitted to the Commissioner of Internal Revenue by Deputy Inspector General for Audit Heather M. Hill. It assesses the Internal Revenue Service's processes for ensuring the accuracy of COVID-19 related employer tax credits on original and amended returns. It finds that processing of Sick and Family Leave Credit and Employee Retention Credit claims did not begin for 12 months, and Social Security Tax Deferral claims for 16 months, and that 447,435 Forms 941-X awaited processing as of February 1, 2022. It projects that 153 of 209 sampled amended returns meeting referral criteria were not referred to Examination, allowing $45 million in potentially erroneous nonrefundable credits. It makes nine recommendations, eight of which the agency accepted.

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Delays Continue to Result in Businesses 
Not Receiving Pandemic Relief Benefits 
 
 
August 31, 2022 
 
Report Number:  2022-46-059 
 
 
 
 
 
 
 
 
This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined 
to be restricted from public release has been redacted from this document. 
TIGTACommunications@tigta.treas.gov   |   www.treasury.gov/tigta 
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION 

HIGHLIGHTS:  Delays Continue to Result in  
Businesses Not Receiving Pandemic Relief Benefits   
Final Audit Report issued on August 31, 2022 
Report Number 2022-46-059 
 
 
Why TIGTA Did This Audit 
In July 2021, TIGTA issued a report 
on the IRS’s efforts to implement 
employer tax credits included in 
the Coronavirus Disease 2019 
(COVID-19) relief legislation.  This 
report is a continuation of our 
review of the IRS’s business tax 
provisions included in the 
legislation passed in response to 
the pandemic.  The overall 
objective of this review was to 
assess the IRS’s processes and 
procedures to ensure the accuracy 
and validity of COVID-19 related 
employer tax credits on original 
and amended tax returns.    
Impact on Tax Administration 
Employers entitled to COVID-19 
related employer credits that did 
not claim them on their original 
Form 941, Employer’s QUARTERLY 
Federal Tax Return, or that wanted 
to increase the amount originally 
claimed filed a Form 941-X, 
Adjusted Employer’s QUARTERLY 
Federal Tax Return or Claim for 
Refund, to reduce their tax liability 
and receive a direct payment 
resulting from any refundable 
credit amount.  The timing of the 
various legislative provisions 
increased the number of 
Forms 941-X the IRS received from 
employers that wished to amend 
their original Form 941.  As of 
February 1, 2022, there were 
447,435 Forms 941-X waiting to be 
processed.   
 
 
 
 
 
 
What TIGTA Found 
Continued processing delays have prevented businesses from 
receiving pandemic relief benefits.  The IRS did not begin processing 
claims for qualified Sick and Family Leave Credits and the Employee 
Retention Credit for 12 months and claims for Social Security Tax 
Deferral for 16 months after the pandemic relief legislation was 
enacted.  This was due to a lack of updated programming and 
procedural guidance.  A lack of training, erroneously suspended 
claims, and a lack of prioritization of claims contributed to additional 
delays processing claims. 
TIGTA identified additional concerns with the IRS’s processes to 
implement retroactive termination of the Employee Retention Credit.  
Specifically, the IRS does not have processes to verify a recovery 
startup business or effective controls to deny the Employee Retention 
Credit for non-recovery startup businesses.  To qualify as a recovery 
startup business, generally, an employer had to begin operations 
after February 15, 2020, and have annual gross receipts that did not 
exceed $1 million over a certain three-taxable-year period.  
In addition, amended returns with Employee Retention Credit claims 
were not referred to Examination for review as required.  TIGTA 
projected that 153 out of 209 amended returns with nonrefundable 
employer credit claims that met the referral criteria were not referred 
to Examination as required resulting in $45 million in potentially 
erroneous nonrefundable employer tax credits being allowed.  This 
occurred because the IRS’s internal guidance did not include 
processes to refer claims with significant refundable employer credits 
to Examination for review.  In addition, tax examiners were not always 
referring amended returns without a refundable tax credit as 
required.     
What TIGTA Recommended 
TIGTA made nine recommendations to the IRS, including developing 
plans to prioritize processing backlogged claims, updating 
Examination referral criteria to include Forms 941-X with refundable 
credit claims, and developing a systemic process to identify 
Forms 941-X that meet referral criteria and alerting the employee 
when processing the claim of the need to refer the return to 
Examination for review.    
The IRS agreed with eight of the nine recommendations.  The IRS did 
not agree additional training was needed for employees related to 
referring Forms 941-X to Examination for review.  Management 
stated they completed subsequent reviews of completed Form 941-X 
claims and determined no additional training was needed.  However, 
the IRS’s subsequent reviews do not address the concerns identified 
in our report.  Accounts Management employees cited unclear 
guidance and training as to why 73 percent of claims were not 
referred when required. 
 

U.S. DEPARTMENT OF THE TREASURY 
WASHINGTON, D.C.  20024 
TREASURY INSPECTOR GENERAL 
FOR TAX ADMINISTRATION 
 
 
 
August 31, 2022 
 
 
MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE 
 
                                       
 
FROM: 
Heather M. Hill 
 
Deputy Inspector General for Audit 
 
SUBJECT: 
Final Audit Report – Delays Continue to Result in Businesses Not 
Receiving Pandemic Relief Benefits (Audit # 202140623) 
 
This report presents the results of our review to assess the Internal Revenue Service’s processes 
and procedures to ensure the accuracy and validity of Coronavirus Disease 2019 related 
employer tax credits on original and amended tax returns.  This review was part of our Fiscal 
Year 2021 Annual Audit Plan and addresses the major management and performance challenges 
of Responding to the COVID-19 Pandemic and Implementing Tax Law Changes. 
Management’s complete response to the draft report is included as Appendix III. 
Copies of this report are also being sent to the Internal Revenue Service managers affected  
by the report recommendations.  If you have any questions, please contact me or 
Diana M. Tengesdal, Acting Assistant Inspector General for Audit (Returns Processing and 
Account Services). 
 

 
 
Delays Continue to Result in Businesses 
Not Receiving Pandemic Relief Benefits 
Table of Contents 
Background .....................................................................................................................................Page 1 
Results of Review .......................................................................................................................Page 5 
Due to Continued Processing Delays, Many Businesses 
Have Not Yet Received Pandemic Relief Benefits ....................................................Page 7 
Recommendation 1: ...................................................................Page 11 
Recommendation 2: ...................................................................Page 12 
Processes Are Needed to Address Legislative Changes 
Affecting the Employee Retention Credit ...................................................................Page 12 
Recommendations 3 and 4: .....................................................Page 13 
Amended Returns With Employee Retention Credit Claims Were 
Not Referred to Examination for Review As Required ...........................................Page 14 
Recommendation 5: ...................................................................Page 14 
Recommendations 6 through 8: ..............................................Page 15 
Recommendation 9: ...................................................................Page 16 
Appendices 
Appendix I – Detailed Objective, Scope, and Methodology ................................Page 17 
Appendix II – Outcome Measures .................................................................................Page 19 
Appendix III – Management’s Response to the Draft Report .............................Page 21 
Appendix IV – Abbreviations ...........................................................................................Page 29 
 
 
 

 
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Background 
On March 18 and March 27, 2020, respectively, the President signed into law the Families First 
Coronavirus Response Act (FFCRA)1 and Coronavirus Aid, Relief, and Economic Security (CARES) 
Act.2  Provisions contained in the FFCRA and CARES Act provide businesses impacted by the 
Coronavirus Disease 2019 (COVID-19) pandemic with three new employer tax credits – the Sick 
Leave Credit, the Family Leave Credit, and the Employee Retention Credit (ERC).  The employer 
tax credits apply to employee retention wages paid between March 13, 2020, and June 30, 2021, 
and wages paid for periods of leave between April 1, 2020, and March 31, 2021. 
In addition, the CARES Act also provided employers with the ability to defer payment of their 
portion of the Social Security tax.  Employers and self-employed individuals deferring the 
employer share of the Social Security tax generally must repay half the deferral by 
December 31, 2021, and the other half by December 31, 2022.  
The FFCRA  
The FFCRA provided refundable tax credits3 to employers with fewer than 500 employees that 
reimburse them, dollar for dollar, for the cost of providing paid sick and family leave wages to 
their employees for leave related to COVID-19.  Full-time employees may receive up to 80 hours 
of paid sick leave to care for their own health needs or to care for other family members.  Also, 
the employee may receive up to 10 weeks of paid family leave to care for a child whose school 
or place of care is closed or whose child care provider is unavailable due to COVID-19 
precautions.  Certain self-employed individuals in similar circumstances are entitled to similar 
credits. 
To qualify for the Sick and Family Leave Credits, employers must be a nongovernmental entity4 
and provide and pay qualified sick or family leave wages, defined in the FFCRA, for periods of 
leave between April 1, 2020, and March 31, 2021.  Specifically, an eligible employer that pays 
qualified leave wages to its employees in a calendar quarter before it is required to deposit 
Federal employment taxes with the Internal Revenue Service (IRS) for that quarter may reduce 
the amount of Federal employment taxes that it deposits by the amount of the qualified leave 
wages paid.  The eligible employer must account for the reduction in deposits on Form 941, 
Employer’s QUARTERLY Federal Tax Return.  However, if there are insufficient Federal 
employment taxes to cover the amount of the credits, an eligible employer may request an 
advance payment of the credits from the IRS.  Figure 1 provides the requirements that need to 
be met to claim the Sick and Family Leave Credits. 
                                                 
1 Pub. L. No. 116-127, 134 Stat. 178 (codified in scattered sections of 7, 26, 29, and 41 U.S.C.), as amended by the 
COVID-Related Tax Relief Act of 2020, Pub. L. No. 116-260, div. N, 134 Stat. 1182, 1964, and the Taxpayer Certainty 
and Disaster Tax Relief Act of 2020, Pub. L. No. 116-260, div. EE, 134 Stat. 1182, 3051 (2020). 
2 Pub. L. No. 116-136, 134 Stat. 281 (codified as amended in scattered sections of 2, 5, 12, 15, 20, 21, 29, 42, and 45 
U.S.C.), as amended by the COVID-Related Tax Relief Act of 2020 and the Taxpayer Certainty and Disaster Tax Relief 
Act of 2020 (2020). 
3 A refundable credit is a credit to reduce a tax liability.  If the tax liability is reduced to zero and a credit remains, it is 
eligible to be refunded to the taxpayer.   
4 Certain tribal governments may also claim the credit. 

 
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Figure 1:  Requirements for the Sick and Family Leave Credits 
Sick Leave Credit 
Family Leave Credit 
Qualified wages are limited to 80 hours or 10 days 
paid to an employee at the employee’s regular 
rate, or if higher, the Federal minimum wage or 
any applicable State or local minimum wages, up 
to $511 per day for the individual.  An employee 
caring for someone is eligible at two-thirds of the 
employee’s regular rate of pay, or applicable 
minimum wages, up to $200 per day.   
Qualified wages are limited to two-thirds of 
the employee’s regular rate of pay up to 
$200 per day per employee for up to 
10 weeks or 50 days of qualified wages paid 
to an employee who is unable to work.   
The maximum credit allowed per employee is 
$5,110 plus the amount of allocable health plan 
expenses and the amount of the eligible 
employer’s share of Medicare tax imposed on the 
qualified sick leave wages. 
The maximum credit allowed per employee is 
approximately $10,000 plus the amount of 
allocable health plan expenses and the 
amount of the eligible employer’s share of 
Medicare tax imposed on the qualified family 
leave wages. 
Employee must be subjected to Federal, State, or 
local government isolation order, requested to 
self-quarantine, experiencing symptoms and 
seeking a diagnosis, caring for an individual in 
isolation or self-quarantine, or caring for a child if 
the school or place of care is closed or is 
unavailable due to COVID-19.   
Employee must be employed for at least 
30 calendar days prior to the start of the 
leave and unable to work/telework due to 
the need to care for a child because their 
school or place of care has been closed or is 
unavailable due to COVID-19.   
Source:  Summary of requirements in the FFCRA. 
The CARES Act  
The CARES Act encourages eligible employers to keep employees on their payroll despite 
experiencing economic hardship related to COVID-19.  As such, the CARES Act created the ERC, 
which is a refundable credit against employment taxes.  The ERC is equal to 50 percent of 
qualified wages paid (including allocable qualified health plan expenses) between 
March 13, 2020, and December 31, 2020.  Additional legislation passed in December 2020 and 
March 2021 increased the credit to 70 percent of qualified wages paid between January 1, 2021, 
and December 31, 2021.5  Certain government entities are not eligible for this credit,6 and  
self-employed individuals are not eligible for this credit with respect to their own  
self-employment earnings. 
To be eligible for the credit, employers must have had a trade or business during Calendar 
Year 2020 or during the calendar quarter for which they are claiming the credit in Calendar 
Year 2021 and either fully or partially suspended operations due to orders from an appropriate 
governmental authority limiting commerce, travel, or group meetings due to COVID-19 or 
                                                 
5 The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021, Pub. L. 
No. 117-2 (2021).   
6 No government entity is eligible for this credit with respect to wages paid between March 13, 2020, and 
December 31, 2020. 

 
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experienced a decline in gross receipts during the calendar quarter.  For Tax Year 2020, the 
maximum amount of qualified wages taken into account with respect to each employee for all 
calendar quarters is $10,000, so the maximum credit for an eligible employer for qualified wages 
paid to any employee is $5,000.  For Tax Year 2021, the maximum amount of qualified wages 
taken into account with respect to each employee for all calendar quarters is $10,000 per 
quarter, so the maximum credit for an eligible employer for qualified wages paid to any 
employee is $7,000 per quarter.7  An eligible employer that pays qualified wages to its 
employees in a calendar quarter before it is required to deposit Federal employment taxes with 
the IRS may reduce the amount of Federal employment taxes by the amount of the ERC it plans 
to claim.  However, if there are insufficient Federal employment taxes to cover the amount of the 
credit, an eligible employer may request an advance payment of the credit from the IRS. 
The CARES Act allows employers and self-employed individuals to defer the payment of 
their employer share of Social Security tax over the next two years. 
Generally, half of the deferral is required to be repaid by December 31, 2021, and the other half 
is due by December 31, 2022.  On August 8, 2020, the President issued a Presidential 
Memorandum8 directing the Secretary of the Treasury to expand the deferral to also include the 
employee’s portion of Social Security tax.9  Pursuant to Notice 2020-65, Relief With Respect to 
Employment Tax Deadlines Applicable to Employers Affected by the Ongoing Coronavirus 
(COVID-19) Disease 2019 Pandemic, employers could elect to defer payment and withholding of 
the employee portion of Social Security tax between September 1 and December 31, 2020, for 
employees with biweekly pay that was less than $4,000.  Under Notice 2020-65, the due date for 
withholding and paying the deferred tax was extended to April 30, 2021.10  Therefore, as of 
September 1, 2020, many employers could defer 100 percent of Social Security tax.    
As of February 25, 2021, we identified 152,739 employers that deferred approximately 
$97.1 billion in Social Security tax.  As mentioned previously, this amount will need to be fully 
repaid by December 31, 2022.11  We have a separate review of the Social Security tax deferral 
repayment process,12 which will focus on the IRS’s processes and procedures to ensure accurate 
and timely repayment of the deferred payments. 
Subsequent legislation modified provisions of the FFCRA and the CARES Act  
On December 27, 2020, the President signed into law the Taxpayer Certainty and Disaster Tax 
Relief Act of 2020 and the COVID-Related Tax Relief Act of 2020, which made changes to the 
                                                 
7 The American Rescue Plan Act of 2021 modified the ERC for the third and fourth quarters of Tax Year 2021, which 
will impact the maximum credit amount for some taxpayers.   
8 Federal Register, Vol. 85, No. 157, pp. 49587–49588, Deferring Payroll Tax Obligations in Light of the Ongoing 
COVID-19 Disaster (August 13, 2020). 
9 The IRS’s authority was established in the issuance of Notice 2020-65, Relief With Respect to Employment Tax 
Deadlines Applicable to Employers Affected by the Ongoing Coronavirus (COVID-19) Disease 2019 Pandemic 
(August 2020). 
10 Notice 2021-11, Additional Relief With Respect to Employment Tax Deadlines Applicable to Employers Affected by 
the Ongoing Coronavirus (COVID-19) Disease 2019 Pandemic (January 2021), made changes to Notice 2020-65 to 
extend the payment period to December 31, 2021.   
11 This amount includes the employee portion of Social Security tax due by December 31, 2021.   
12 Treasury Inspector General for Tax Administration (TIGTA), Audit No. 202240623, Review of Social Security Tax 
Deferral Repayment. 

 
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new employer tax credits created in the FFCRA and the CARES Act passed in March 2020.  
Employers are eligible to continue to claim the Sick and Family Leave Credits for wages paid for 
leave taken through March 31, 2021, and the ERC through June 30, 2021.  The new legislation 
also retroactively clarified language in the FFCRA and the CARES Act.  For example, the 
legislation clarified the treatment of group health plan expenses for purposes of the ERC.  
Further, the legislation retroactively modified the limitation that employers who received a 
Paycheck Protection Program13 loan could not also receive the ERC, thus allowing employers to 
both receive the loan and claim the credit under certain conditions, but not for the same wages.  
Additionally, the new legislation extended the due date for employers to repay the employee 
share of the Social Security tax deferral from April 30, 2021, to December 31, 2021.  
On March 11, 2021, the President signed into law the American Rescue Plan Act,14 which 
provided employer tax credits similar to those provided by the FFCRA and the CARES Act.  
Employers15 are now eligible to continue to claim the Sick and Family Leave Credits for periods 
of leave provided through September 30, 2021, and the ERC through December 31, 2021.   
On November 15, 2021, the President signed into law the Infrastructure Investment and Jobs 
Act,16 which limited the availability of the ERC only to wages paid before October 1, 2021, unless 
the employer is a recovery startup business (RSB).  Businesses that were not a RSB were no 
longer eligible for the credit for wages paid after September 30, 2021.  Because of the 
retroactive termination, some businesses no longer eligible to claim the credit may have already 
reduced their employment tax deposits in anticipation of claiming the credit for the fourth 
quarter of 2021.   
Implementation of Tax Year 2020 employer tax credits enacted in response to the 
COVID-19 pandemic  
In July 2021, we issued a report on the IRS’s efforts to implement employer tax credits included 
in relief legislation.17  We reported that the IRS did not have adequate time after the pandemic 
relief legislation was passed to make significant programming changes because the tax return 
filing season was already underway and Forms 941 were being processed when the legislation 
was enacted.  As such, validations were not performed during tax return processing to identify 
potentially erroneous or fraudulent employer tax credits claimed on employment tax returns.  In 
addition, we reported that ineligible entities were allowed to claim the COVID-19 employer tax 
credits in error.  Specifically, we reported that 113 ineligible government entities received 
erroneous employer tax credits totaling $2 million.   
                                                 
13 The CARES Act established the Paycheck Protection Program to help businesses retain their employees by offering 
potentially forgivable loans from Small Business Administration lenders for use to meet payroll needs and other 
business expenses.   
14 Pub. L. No. 117-2 (2021). 
15 Employers now include governmental employers except the Government of the United States or any agency or 
instrumentality thereof that is not an organization described in I.R.C. § 501(c)(1). 
16 Pub. L. No. 117-58 (2021). 
17 TIGTA, Report No. 2021-46-043, Implementation of Tax Year 2020 Employer Tax Credits Enacted in Response to the 
COVID-19 Pandemic (July 2021). 

 
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Results of Review 
This report is a continuation of our review of the IRS’s business tax provisions included in the 
legislation enacted in response to the COVID-19 pandemic.  The timing of the various legislative 
provisions increased the number of Forms 941-X, Adjusted Employer’s QUARTERLY Federal Tax 
Return or Claim for Refund, filed by employers to amend their original Form 941.  Employers 
entitled to COVID-19 related employer credits that did not claim them on their original 
Form 941 or that wanted to increase the amount originally claimed filed a Form 941-X to reduce 
their tax liability and receive a direct payment resulting from any refundable credit amount.  
However, we found that ongoing and considerable delays in the processing of amended 
Forms 941 filed by businesses resulted in businesses not timely receiving the immediate 
financial relief for which this legislation was enacted.  As of February 1, 2022, there were 
447,435 Forms 941-X waiting to be processed.  Over 90 percent (402,814) of these Forms 941-X 
were over-aged, i.e., have not been processed within 45 calendar days.  In addition, 60,885 
(13.6 percent) of the Forms 941-X were not processed within 180 calendar days.  Figure 2 shows 
that there was a steady increase in the number of over-aged cases received with COVID-19 
related employer credits.   
Figure 2:  Forms 941-X Over-Aged Inventory Through February 1, 2022 
 
Source:  Treasury Inspector General for Tax Administration (TIGTA) analysis of the IRS’s 
Standard Aged Reports. 

 
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In contrast, Figure 3 shows that the IRS was not closing over-aged cases at the same pace as the 
cases were received until January 2022.   
Figure 3:  Forms 941-X Over-Aged Inventory Closed Through February 1, 2022 
 
Source:  TIGTA analysis of the IRS’s Standard Weekly Closure Reports. 
The IRS took corrective actions to identify and prevent potentially fraudulent employer tax 
credits claimed on Forms 941 in response to the concerns raised in our July 2021 report.18  
These actions included: 
• 
Updated an identity theft fraud filter, previously implemented in September 2020, to 
identify during processing suspicious Forms 941 with employer tax credit claims meeting 
certain criteria.  As of March 10, 2022, the IRS had identified 11,096 returns with more 
than $2 trillion in credits claimed.  In addition, in April 2022, the IRS implemented new 
processes to identify potentially fraudulent claims by businesses with questionable 
characteristics.     
• 
Implemented processes and procedures to identify erroneous employer tax credit claims 
associated with ineligible government entities.  Specifically, the IRS identified returns 
filed by employers claiming COVID-19 related business credits over a specific threshold 
amount and with employment codes indicating the employer is a government entity.  
Once potentially ineligible government entities are identified, the Employer Identification 
Numbers (EIN)19 are sent to the Tax Exempt and Government Entities function for 
validation.  If determined to be ineligible, the IRS reverses the credits.  Using this process, 
the IRS identified 7,400 ineligible government entities and reversed credits totaling 
$124 million as of March 2022. 
                                                 
18 TIGTA, Report No. 2021-46-043, Implementation of Tax Year 2020 Employer Tax Credits Enacted in Response to the 
COVID-19 Pandemic (July 2021). 
19 A unique nine-digit number used to identify a taxpayer’s business account. 

 
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While the IRS’s corrective actions improved the detection of potentially fraudulent employer tax 
credits claimed on Forms 941, additional actions are needed to better identify and address 
potentially erroneous refunds. 
Due to Continued Processing Delays, Many Businesses Have Not Yet Received 
Pandemic Relief Benefits  
The IRS did not immediately begin processing Forms 941-X with pandemic relief claims.  
Figure 4 shows that the IRS did not begin processing amended returns reporting qualified Sick 
and Family Leave Credits and the ERC for 12 months after the pandemic relief legislation was 
enacted.  The IRS did not begin processing amended returns reporting changes to Social 
Security tax deferral for 16 months.  

 
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Figure 4:  IRS Amended Return Processing Timelines for Pandemic Relief  
 
Source:  TIGTA summary of Servicewide Electronic Research Program Alerts related to amended returns 
requesting pandemic relief. 
Figure 5 provides the volumes of claims the IRS had in its suspended inventory, i.e., claims being 
held, while the IRS continued to delay processing Forms 941-X with pandemic relief claims.    

 
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Figure 5: Number of Suspended  
Amended Employment Tax Returns 
Date 
Number of Claims Suspended 
Social Security 
Tax Deposit 
Deferral  
Qualified Sick and 
Family Leave Credits  
and the ERCs 
Total CARES Act 
Credits 
May 29, 2021 
4,537 
2,806 
7,343 
June 19, 2021 
5,831 
2,681 
8,512 
July 17, 2021 
6,155 
7,153 
13,308 
November 20, 2021 
12,831 
31,855 
44,686 
Source:  IRS-provided inventory data for the ERC, Sick and Family Leave Credits, 
and Social Security tax deposit deferrals. 
We notified IRS management twice during this review of our concerns with actions taken on the 
part of management to assist businesses in the processing of their claims for qualified Sick and 
Family Leave Credits, the ERC, and deferred Social Security taxes.  For example:  
• 
On June 21, 2021, we notified IRS management of our concerns regarding the IRS’s 
suspension of processing of all Forms 941-X with claims for COVID-19 related employer 
credits after processing claims for only two months after a 12-month delay.  IRS 
management stated that the delays in processing Forms 941-X with claims for COVID-19 
related employer credits were attributable to development of processing procedures as 
well as programming issues associated with processing claim adjustments.  However, we 
do not agree that the legislative changes would justify a delay of more than eight 
months to update the internal guidelines and more than 15 months to update 
programming to process the claims with employer credits on Forms 941-X.  The IRS was 
able to process employer credits claimed on Forms 941 and advanced tax credits claimed 
on Forms 7200, Advance Payment of Employer Credits Due to COVID-19, without an 
extended delay.   
• 
On February 2, 2022, we notified IRS management of our concerns regarding the 
continued delay of processing Forms 941-X with claims for COVID-19 related employer 
credits, and management stated the delay was due to a lack of procedural guidance for 
claims received for tax periods ending June 30, 2021, and later.  Specifically, 
management noted that it was ”difficult to engage in delivering multiple complex 
procedural updates simultaneously, or in close chronological proximity, particularly if 
they are intricately related to existing guidance or guidance that is in flux.”  Although the 
IRS was tasked to update its processes several times to accommodate claims received 
due to legislative changes, we do not agree that the changes warrant a significant delay 
in processing.  
In response to the explanation provided by management, we requested information 
supporting management’s claim of significant processing differences between COVID-19 
related employer credits reported on Forms 941-X for tax periods ending before 
June 30, 2021, and those claims received for tax periods ending June 30, 2021, and later.  
According to IRS management, coordination was required with various functions to 

 
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ensure comprehensive implementation of the legislative changes.  IRS management also 
noted the changes in the law were complex, the handling was complex, and new 
handling must be layered onto previous handling that had already vastly increased in 
complexity since the beginning of 2020.  For example, the IRS cited 11 new tracking 
numbers to record changes to the accounts.  As noted previously, we do not agree that 
the differences between employer credits for tax periods ending June 30, 2021, and after 
and credits for tax periods ending before June 30, 2021, justified the significant 
additional processing delays. 
Steps were not immediately taken to prioritize backlogs of suspended Form 941-X claims  
The IRS did not take immediate steps to prioritize Form 941-X claims that were suspended.  As 
noted previously, the IRS resumed processing Forms 941-X with claims for COVID-19 related 
employer credits in July 2021 after several delays.  However, IRS management did not begin its 
weekly calls to engage Headquarters and processing sites to make COVID-19 business credit 
cases priority work until August 2021.  The IRS did not begin tracking the processing of 
amended employment tax returns with COVID-19 related employer credits until 
September 2021.  As such, the IRS did not begin prioritizing amended employment tax returns 
with COVID-19 related employer credits or tracking the processing of the backlog of suspended 
Forms 941-X for eight months after procedures to process the amended employment tax 
returns were available.  As of January 29, 2022, the IRS reported having 27,790 Form 941-X 
claims previously suspended that need to be processed.   
According to IRS management, additional steps were taken to address the backlog of 
suspended Forms 941-X after it began processing the suspended Forms 941-X.  For example, 
IRS management stated that training was provided to more than 600 customer service 
representatives in the Accounts Management function to work COVID-19 related employer 
credit claims and 125 customer service representatives to work deferrals of Social Security tax 
claims while they are working paper cases.  However, as we reported in March 2022,20 many 
Accounts Management employees split their time between working Accounts Management 
cases and answering IRS toll-free telephone calls, and a dedicated staff to work Accounts 
Management inventory is needed to address the ongoing challenge.  As such, training 
additional staff may not immediately impact the over-aged inventory or give any priority to the 
backlogged amended employment tax returns.   
Over-aged Accounts Management inventory has been an ongoing challenge for the IRS.  The 
COVID-19 pandemic and recent pandemic-related tax law changes have further exacerbated the 
over-aged inventory.21  Providing training alone is not sufficient to address the ongoing backlog 
of over-aged inventory.   
COVID-19 related employer credit claims were intended to provide relief to businesses that have 
been impacted by COVID-19.  The delay in processing Forms 941-X and the significant backlog 
prevented businesses from timely receiving the monetary benefits intended by the FFCRA and 
the CARES Act to provide immediate relief to employers.  In addition, processing delays could 
result in unnecessary interest paid by the IRS when the claims were processed.   
                                                 
20 TIGTA, Report No. 2022-46-027, Program and Organizational Changes Are Needed to Address the Continued 
Inadequate Tax Account Assistance Provided to Taxpayers (Mar. 2022). 
21 TIGTA, Report No. 2021-40-038, Interim Results of the 2021 Filing Season (May 2021). 

 
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In addition to the causes that IRS management cited for significant delays in processing 
COVID-19 related employer credit claims, we found that the following contributed to these 
delays: 
• 
Lack of trained staff caused additional delays to processing COVID-19 related 
employer credits.  The IRS issued procedures to process Forms 941-X with claims for 
qualified Sick and Family Leave Credits and the ERC on December 11, 2020.  However, 
the IRS did not provide training for its employees to process these claims until March 
and April 2021.  As such, the IRS could not begin processing these claims at either the 
Cincinnati or Ogden sites due to a lack of training until the end of April 2021 
contributing to the significant backlog of unprocessed Forms 941-X with COVID-19 
related employer credit claims.  The IRS subsequently ceased processing claims again in 
May and June of 2021 due to programming issues identified.  The IRS did not 
continuously process claims until July 2021 at which point it had more than 
13,300 amended employment tax returns in inventory waiting to be processed.    
• Erroneously suspended Forms 941-X with COVID-19 related employer credit claims.  On 
October 28, 2020, the IRS issued guidance to suspend processing of Forms 941-X with an 
adjustment to the amount of deferred Social Security tax or if the tax account had a 
previously posted deferred Social Security tax amount.  IRS management stated that they 
needed to suspend the processing of these amended employment tax returns because 
of “technical and administrative complexities” associated with claims of deferred Social 
Security tax.  Specifically, IRS management attributed it to the lack of procedures and 
programming in place to ensure that amended employment tax returns are processed 
accurately. 
Our review of a statistically valid sample22 of 74 Forms 941-X included in the suspense 
inventory found that 24 (32 percent) of the amended employment tax returns were 
suspended erroneously.  These amended employment tax returns should not have been 
suspended because they did not meet the IRS’s criteria to suspend the claim.  
Specifically, these amended employment tax returns did not include an adjustment to 
the amount of deferred Social Security tax or meet the exception criteria for 
processing.  These 24 Forms 941-X also had an average age of 201 days in inventory or 
more than six months.  Based on the results of our statistically valid sample, we project 
that 4,00123 of the 12,337 amended employment tax returns in the suspense inventory 
were suspended erroneously.   
Recommendation 1 (E-Mail Alert):  On November 22, 2021, we notified the Director, Customer 
Account Services, Wage and Investment Division, that IRS employees were erroneously 
suspending Forms 941-X when the amended employment tax return did not include an 
adjustment to the amount of deferred Social Security tax.  We recommended that the Accounts 
Management function immediately review the Forms 941-X that are identified in the suspense 
                                                 
22 We selected a statistical sample using a confidence level of 90 percent, an expected error rate of 5 percent, and a 
precision factor of +5 percent. 
23 The point estimate projection is based on a two-sided 90 percent confidence interval.  We are 90 percent confident 
that the actual total amount is between 2,899 and 5,237. 

 
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inventory as an adjustment to the amount of deferred Social Security tax to ensure that they are 
categorized properly.   
 
Management’s Response to Alert:  IRS management agreed that the majority of the 
amended employment tax returns TIGTA identified were erroneously suspended.  IRS 
management implemented additional reviews of suspended inventory to evaluate 
whether the cases were correctly suspended.  Random sample reviews of the unworkable 
lists continue to be conducted at the Accounts Management sites to determine if cases 
controlled there are workable, and if so, reassign them accordingly.  As of July 8, 2022, 
management determined that they have 76,079 Form 941-X claims suspended that need 
to be processed. 
• Lack of prioritization resulted in a delay processing 96 percent of tentative refund 
claims.  The IRS did not process claims for tentative refunds within 45 days.  Our review 
of the IRS’s inventory of tentative refund claims on the Form 1139, Corporation 
Application for Tentative Refund, found that 8,229 (96 percent) of the 8,613 tentative 
carryback claims in inventory as of January 29, 2022, were over-aged.  Although the IRS 
has implemented plans to reduce the backlog, such as shifting Accounts Management 
employees away from answering telephones to working paper returns, authorizing 
overtime, and increasing inventory levels for trained employees, the IRS has not 
prioritized the processing of tentative refund claims and does not have a specific plan to 
address the backlog.   
Recommendation 2:  The Commissioner, Wage and Investment Division, should evaluate the 
current inventory of backlogged claims related to pandemic relief and develop specific plans to 
prioritize claims and develop timelines to process backlogged claims.  
 
Management’s Response:  The IRS agreed with this recommendation and has 
continued its efforts to reduce the inventory increases from the pandemic.  Those efforts 
included increased staffing with overtime and 100 percent of the campus employees’ 
time focused on paper inventory.  Through June 25, 2022, these actions have reduced 
the inventory of the Form 1139 carrybacks to under 1,100 applications. 
Processes Are Needed to Address Legislative Changes Affecting the 
Employee Retention Credit 
On November 15, 2021, the President signed into law the Infrastructure Investment and Jobs 
Act,24 which limited the availability of the ERC only to wages paid before October 1, 2021, unless 
the employer is an RSB.25  As such, all businesses that were not RSBs became ineligible for the 
credit for wages paid after September 30, 2021.  Our review of the IRS’s processes to implement 
these retroactive changes to the ERC identified the following concerns: 
                                                 
24 Pub. L. No. 117-58 (2021). 
25 An RSB is defined in I.R.C. § 3134(c)(5) as an employer that began carrying on any trade or business after 
February 15, 2020, for which the average gross receipts of the employer for the three-taxable-year period ending with 
the taxable year before the quarter the credit is determined does not exceed $1 million and is not otherwise an 
eligible employer due to the full or partial suspension of operations or a decline in gross receipts.  

 
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• 
The IRS does not have processes to verify whether a business claiming the ERC is in 
fact an RSB.  According to IRS management, the IRS will rely on the taxpayer’s attestation 
on the employment tax return signed under penalties of perjury, at filing, that the business 
is eligible for the ERC solely because the business in an RSB.  Our analysis of Forms 941 
received for the third quarter of Tax Year 2021 as of January 31, 2022, identified 
928 business entities, claiming nearly $17.5 million in refundable ERCs, which had an EIN 
issued before February 15, 2020.26  As such, these business might not qualify as an RSB.  
Furthermore, our analysis of fourth quarter Forms 941 as of February 16, 2022, identified 
26 businesses that attested under penalties of perjury that they were an RSB but did not 
identify as an RSB on their third quarter Form 941.  
When we shared our results with IRS management, they noted that an examination may be 
necessary to determine whether a business qualifies as an RSB and therefore qualifies for the 
ERC.  According to IRS management, factors such as changes in gross receipts or a partial or 
full suspension of operations could result in a business qualifying as an RSB in one quarter, 
but not another.  We agree that an RSB determination would likely need to be reviewed in a 
post-processing compliance environment.  However, the IRS has not developed processes to 
identify specific claims to be selected for an examination.  
• 
The IRS does not have effective controls to deny the ERC for non-RSBs.  The IRS did not 
properly deny the ERC for businesses that did not identify as an RSB.  According to IRS 
management, in December 2021, programming was implemented to allow only businesses 
that indicated that they are an RSB on the Form 941 to claim the ERC.  However, our analysis 
of Forms 941 submitted for fourth quarter Tax Year 2021 as of February 2, 2022, identified 
920 businesses that received nearly $12.6 million in the ERCs when there was no indication 
that the business was an RSB.  When we shared our results with the IRS, it noted that 
electronically filed Forms 941 are not accepted until the tax period ends thereby preventing 
non-RSB filers from submitting pre-legislation change forms.  However, paper-filed returns 
are accepted and processed at any time within a quarter.  Therefore, Forms 941 submitted 
on paper for fourth quarter Tax Year 2021 could have been processed before the 
programming was implemented that prevented claims of the ERC without the RSB box 
checked.  The IRS has developed an examination workstream to address Forms 941 that 
have already been processed.  This workstream is scheduled to begin in summer 2022.  
Recommendation 3:  The Commissioner, Wage and Investment Division, should review the 
928 business entities identified that do not appear to qualify as an RSB and take actions needed 
to recover the ERCs that are determined to be erroneous.  
 
Management’s Response:  The IRS agreed with this recommendation and plans to 
review the 928 returns to identify the returns exceeding its thresholds.  IRS management 
also plans to determine if other noncompliance indicators are present and take 
compliance action if warranted of those that exceed the thresholds. 
Recommendation 4:  The Commissioner, Small Business/Self-Employed Division, should 
identify all fourth quarter Tax Year 2021 paper-filed Forms 941 processed prior to when the 
programming was implemented and identify amended employment tax returns receiving the 
                                                 
26 The instructions for Form 941 list one of the basic requirements to be considered an RSB is the employer had to 
have begun to carry on a trade or business after February 15, 2020.  

 
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ERC for which there was no indication that the business was an RSB and take actions needed to 
recover the ERCs that are determined to be erroneous.  
 
Management’s Response:  The IRS agreed with this recommendation.  IRS management 
also identified this issue on February 24, 2022, independent of TIGTA’s audit.  
Management began development of a process to identify and address this issue and 
plans to finalize and implement the process once completed. 
Amended Returns With Employee Retention Credit Claims Were Not Referred 
to Examination for Review As Required 
Our review identified that some returns with ERC claims were not referred to Examination as 
required.  During our review, we determined that the IRS’s internal guidance did not include 
processes to refer amended employment tax returns with significant refundable employer credit 
claims to Examination for review.   
Accounts Management employees are required to refer certain Forms 941-X to Examination 
during processing.  This process is in place in an effort to identify potentially fraudulent claims 
prior to refund issuance.  However, the referral criteria only related to nonrefundable employer 
credits and was not updated to include Forms 941-X that resulted in a material refundable 
employer credit.  As such, refundable credit claims were not being referred because they are 
considered not to result in a decrease to tax.  We notified IRS management of this inconsistency 
on May 13, 2021.   
Recommendation 5 (E-Mail Alert):  On May 13, 2021, we notified the Director, Examination, 
Small Business/Self-Employed Division, about the inconsistent referral criteria and 
recommended that the IRS update referral criteria to include Forms 941-X with refundable 
credits.   
 
Management’s Response to Alert:  The IRS agreed with our recommendation.  On 
July 22, 2021, the IRS updated its referral criteria to include Forms 941-X with refundable 
credits.  IRS management also subsequently monitored quality reports to ensure correct 
referrals to Examination. 
In addition, we determined that tax examiners were not referring some returns with only 
nonrefundable employer credit claims that met initial criteria.  Specifically, our review identified 
209 Forms 941-X processed as of July 28, 2021, that met the referral criteria.  We reviewed a 
statistically valid sample27 of 56 Forms 941-X and found that 41 (73 percent) were not referred 
to Examination.  These 41 Forms 941-X contained nonrefundable COVID-19 related employer 
credit claims totaling more than $12 million.  Based on the results of our statistically valid 
sample, we project that 15328 of the 209 amended returns were not referred as required 
resulting in $45 million in potentially erroneous nonrefundable employer tax credits being 
allowed.  We notified IRS management on November 23, 2021.  IRS management issued a 
                                                 
27 We selected a statistical sample using a confidence level of 90 percent, an expected error rate of 5 percent, and a 
precision factor of +5 percent. 
28 The point estimate projection is based on a two-sided 90 percent confidence interval.  We are 90 percent confident 
that the actual total amount is between 133 and 170. 

 
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Service-wide reminder to its employees on December 1, 2021, to follow the CAT-A29 referral 
criteria.   
Recommendation 6 (E-Mail Alert):  On November 23, 2021, we alerted the Director, Customer 
Account Services, Wage and Investment Division, that Forms 941-X were not being referred to 
Examination as required and recommended that the Accounts Management function provide 
additional guidance to its employees to reinforce established CAT-A referral criteria.  
 
Management’s Response to Alert:  IRS management agreed and issued a Servicewide 
Electronic Research Program alert on December 1, 2021, reminding employees to follow 
the CAT-A referral criteria. 
Recommendation 7:  The Commissioner, Wage and Investment Division, should review the 
41 Form 941-X claims identified with a nonrefundable COVID-19 related employer credit that 
meet CAT-A referral criteria and take actions needed to recover credits that are determined to 
be erroneous.   
 
Management’s Response:  The IRS agreed with this recommendation and plans to 
review the cases and take appropriate action. 
We interviewed a judgmental sample30 of seven Accounts Management employees associated 
with the 41 returns that were not referred as required.  According to the seven employees we 
contacted, amended employment tax returns were not referred due to the following reasons: 
o Employees stated that they “just forgot” to refer the cases to Examination. 
o Unclear guidance and training. 
o Multiple changes to guidance. 
As such, the issuance of a reminder may not be sufficient to address the unclear guidance and 
training. 
The Commissioner, Wage and Investment Division, should: 
Recommendation 8:  Provide additional training to employees as it relates to referring 
Forms 941-X to Examination for review.   
 
Management’s Response:  The IRS disagreed with this recommendation.  IRS 
management stated that they completed subsequent reviews of completed Form 941-X 
claims and determined no additional training was needed.   
 
Office of Audit Comment:  The IRS’s subsequent reviews do not address the 
concerns identified in our report.  As previously stated, Accounts Management 
employees cited unclear guidance and training as reasons why 73 percent of 
the Form 941-X claims we reviewed were not referred to Examination as 
required.  Further, IRS management noted in its response that 2,484 COVID-19 
                                                 
29 The CAT-A is the IRS’s examination criteria. 
30 A judgmental sample is a nonprobability sample, the results of which cannot be used to project to the population. 

 
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Forms 941-X claims have yet to be processed as of August 1, 2022.  As such, we 
continue to believe that additional training is warranted.   
Recommendation 9:  Submit a request for the development of a systemic process to identify 
Form 941-X claims that meet referral criteria and alert the Accounts Management employee 
when processing these claims of the need to refer the return to Examination.   
 
Management’s Response:  The IRS agreed with this recommendation and plans to 
determine the feasibility of a systemic process and submit the necessary requests, if 
warranted. 
 
 

 
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Appendix I 
Detailed Objective, Scope, and Methodology 
The overall objective of this audit was to assess the IRS’s processes and procedures to ensure 
the accuracy and validity of COVID‐19 related employer tax credits on original and amended tax 
returns.  To accomplish our objective, we: 
• 
Reviewed guidance provided to Accounts Management in Servicewide Electronic 
Research Program Alerts, Internal Revenue Manual Procedural Updates, etc. related to 
processing Forms 941-X with COVID-19 related employer credits to determine whether 
accurate and timely information was provided. 
• 
Identified the number of Forms 941-X with COVID-19 related business credits in 
Accounts Management’s current inventory, including those still suspended due to a lack 
of Accounts Management processing procedures and determined the average age of the 
current inventory and suspended cases.  We reviewed a statistically valid random sample 
of 74 Forms 941-X out of a total population of 12,337 with COVID-19 related employer 
credits in the suspense inventory to determine whether the claims were accurately 
suspended.  We reviewed a statistically valid sample in order to project our results.  Our 
sample was based on a confidence level of 90 percent, an expected error rate of 
5 percent, and a precision factor of ±5 percent.  Our contracted statistician assisted with 
developing sampling plans and projections. 
• 
Evaluated the IRS’s processes to implement retroactive changes to the ERC that limited 
the ERC to the RSBs in the fourth quarter of Calendar Year 2021. 
• 
Assessed the IRS’s processes to ensure the accuracy of processing Forms 941-X with 
COVID-19 related employer credit claims on Forms 941-X, i.e., referral of potentially 
fraudulent claims by Accounts Management to Examination for review.  We reviewed a 
statistically valid sample of 56 Forms 941-X out of a population of 209 that met the 
examination referral criteria to determine whether claims were being referred to 
Examination when required.  Our sample was based on a confidence level of 90 percent, 
an expected error rate of 5 percent, and a precision factor of ±5 percent.  Our contracted 
statistician assisted with developing sampling plans and projections.      
• 
Evaluated the processes and procedures to identify erroneous COVID-19 related 
employer credits claimed by businesses associated with new EINs.  We analyzed Tax 
Year 2021 Forms 941 filed using a newly issued EIN that claimed the ERC to assess 
whether the newly implemented filter was working as intended. 
This review was performed with information obtained from the Small Business/Self Employed 
Division Headquarters located in Atlanta, Georgia, and the Wage and Investment Division’s 
Accounts Management sites located in Covington, Kentucky; and Ogden, Utah, during the 
period June 2021 through March 2022.  We conducted this performance audit in accordance 
with generally accepted government auditing standards.  Those standards require that we plan 
and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis 
for our findings and conclusions based on our audit objective.  We believe that the evidence 

 
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obtained provides a reasonable basis for our findings and conclusions based on our audit 
objective.   
Major contributors to the report were Russell Martin, Assistant Inspector General for Audit 
(Returns Processing and Account Services); Linna K. Hung, Director; Van Warmke, Audit 
Manager; Mark Willoughby, Lead Auditor; Ian Maloney, Auditor, Brett Skaggs, Auditor; and 
Laura Haws, Information Technology Specialist (Data Analytics)  
Validity and Reliability of Data From Computer-Based Systems  
We performed tests to assess the reliability of data extracts received from the Correspondence 
Imaging System and the Business Master File.  We evaluated the data by performing electronic 
testing of required data elements and reviewing existing information about the data.  In 
addition, we selected data from each extract and verified that the data in the extracts were the 
same as the data captured in the IRS’s Integrated Data Retrieval System1 and Correspondence 
Imaging System.  We determined that the data were reliable. 
Internal Controls Methodology 
Internal controls relate to management’s plans, methods, and procedures used to meet their 
mission, goals, and objectives.  Internal controls include the processes and procedures for 
planning, organizing, directing, and controlling program operations.  They include the systems 
for measuring, reporting, and monitoring program performance.  We determined that the 
following internal controls were relevant to our audit objective:  procedures to review and 
process Forms 941-X.  We evaluated these controls by reviewing the Internal Revenue Manual 
and interviewing employees responsible for processing Forms 941-X. 
                                                 
1 IRS computer system capable of retrieving information, which works in conjunction with a taxpayer’s account. 

 
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Appendix II 
Outcome Measures 
This appendix presents detailed information on the measurable impact that our recommended 
corrective actions will have on tax administration.  These benefits will be incorporated into our 
Semiannual Report to Congress. 
Type and Value of Outcome Measure: 
• 
Taxpayer Burden – Potential; 4,001 taxpayer accounts that had refunds delayed because 
the Forms 941-X were erroneously suspended from processing due to errors by IRS 
employees (see Recommendation 1). 
Methodology Used to Measure the Reported Benefit: 
In October 2020, the IRS issued guidance to its employees to suspend processing of 
Forms 941-X with an adjustment to the amount of deferred Social Security tax or if the tax 
account had a previously posted deferred Social Security tax amount.  IRS management stated 
that they needed to suspend the processing of these claims because of the lack of procedures 
and programming in place to ensure that claims are processed accurately. 
We identified a population of 12,337 Forms 941-X in inventory that were in a suspended status.  
We reviewed a statistically valid sample1 of 74 of those Forms 941-X and found that 
24 (32 percent) of the claims were erroneously suspended.  These claims should not have been 
suspended because they did not include an adjustment to the amount of deferred Social 
Security tax or meet the exception criteria for processing.  Based on the results of our 
statistically valid sample, we project that 4,0012 of the 12,337 claims in the suspended inventory 
were suspended erroneously.  
Type and Value of Outcome Measure: 
• 
Cost Savings (Funds Put to Better Use) – Potential; $45,310,431 in potentially erroneous 
nonrefundable employer tax credits processed on amended returns that did not receive 
review by Examination (see Recommendations 7, 8, and 9). 
Methodology Used to Measure the Reported Benefit: 
Accounts Management employees are required to refer Forms 941-X that result in a reduction in 
net tax of ******2****** or more to Examination during processing.  This process is in place in an 
effort to identify potentially fraudulent claims prior to refund issuance.  However, we found that 
the tax examiners were not referring some returns without a refundable credit claim as required.   
                                                 
1 We selected a statistical sample using a confidence level of 90 percent, an expected error rate of 5 percent, and a 
precision factor of +5 percent. 
2 The point estimate projection is based on a two-sided 90 percent confidence interval.  We are 90 percent confident 
that the actual total amount is between 2,899 and 5,237. 

 
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Specifically, our review identified 209 Forms 941-X processed as of July 28, 2021, that met the 
CAT-A referral criteria.  We reviewed a statistically valid sample3 of 56 of these Forms 941-X and 
found that 41 (73 percent) were not referred to Examination as required.  Based on the results of 
our statistically valid sample analysis, we project that 1534 amended returns were not referred as 
required resulting in $45,310,431 in potentially erroneous nonrefundable employer tax credits 
being allowed.  
 
                                                 
3 We selected a statistical sample using a confidence level of 90 percent, an expected error rate of 5 percent, and a 
precision factor of +5 percent. 
4 The point estimate projection is based on a two-sided 90 percent confidence interval.  We are 90 percent confident 
that the actual total amount is between 133 and 170. 

 
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Appendix III 
Management’s Response to the Draft Report 
 

 
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Appendix IV 
Abbreviations 
CARES 
Coronavirus Aid, Relief, and Economic Security 
COVID-19 
Coronavirus Disease 2019 
EIN 
Employer Identification Number 
ERC 
Employee Retention Credit 
FFCRA 
Families First Coronavirus Response Act 
IRS 
Internal Revenue Service 
RSB 
Recovery Startup Business 
TIGTA 
Treasury Inspector General for Tax Administration 
 

 
 
 
 
 
 
 
To report fraud, waste, or abuse,  
call our toll-free hotline at: 
(800) 366-4484 
By Web: 
www.treasury.gov/tigta/ 
Or Write: 
Treasury Inspector General for Tax Administration 
P.O. Box 589 
Ben Franklin Station 
Washington, D.C. 20044-0589 
 
 
Information you provide is confidential, and you may remain anonymous.

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