NAPEO, "Employee Retention Tax Credit" advocacy page (napeo.org; modified July 7, 2026; read Sept. 30, 2026)

Summary

A NAPEO (National Association of Professional Employer Organizations) advocacy page on the Employee Retention Tax Credit (ERTC), modified July 7, 2026 and captured September 30, 2026. It offers a Congressional Casework Guide, a case information template and a message template for asking a House or Senate office for help with delayed IRS responses and unresolved claims. Its IRS ERTC Processing Update as of July 2026 says approximately 200 returns from 10 EINs covering 25 periods were still under review, down from approximately 490 returns from approximately 20 EINs the prior month. It also covers advance notification letters, 105C disallowance letters that the IRS said were legitimate, and the Infrastructure Investment and Jobs Act ending the credit after the third quarter of 2021, except for recovery startup businesses.

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Employee Retention Tax Credit

The Employee Retention Tax Credit (ERTC) was created for eligible businesses that kept employees on payroll during the COVID-19 pandemic.

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Congressional Casework Guide

NAPEO’s Congressional Casework Guide is designed to help you engage your elected representatives to resolve issues with federal agencies. From delayed IRS responses and unresolved claims to regulatory and administrative roadblocks, congressional offices can often play an important role in helping businesses navigate federal bureaucracy and obtain needed answers.

View the full guide here and see below for a summary of key instructions for using the templates during the congressional casework process.

ERTC Case Information Template

Use this form before contacting your congressional office to ensure you are prepared to provide complete information. You can fill out the form directly in the PDF.

Message Template: Request for Congressional Casework Assistance

You can use (or modify as needed) this template to submit your request through your U.S. House or Senate office’s website.

Instructions:

- Download the template document using this link .
- Open the downloaded Word document.
- Click “Enable Editing” to begin filling in the document.

Additionally, here is an example of what a Privacy Act Release Form looks like, but each congressional office has its own version.

IRS ERTC PROCESSING UPDATE (as of JULY 2026)

- Volume of Aggregate Filer Claims Pending Action: Approximately 200 returns from 10 EINs and covering 25 periods are still being reviewed to determine if cases will be accepted or selected for audit. This is down from approximately 490 returns representing approximately 20 EINs from last month. The IRS expressed that they expect to complete their review of approximately half of the remaining periods within the month of July, while the other half are pending taxpayer information, such as a Schedule R, to begin their review.
- Update on Advance Notification Letters: As noted in NAPEO’s last update, some third-party payers (TPPs) have been selected for examination but have not yet been sent a notification of examination due to resource availability. The IRS is planning to issue soft notices in the second half of July to most taxpayers whose examinations haven’t been initiated so they can begin to prepare their records.
- Update on 105C Disallowance Letters: In NAPEO’s last call with IRS officials, they indicated that they were working to address concerns related to 105C disallowance letters. IRS officials indicated that such letters had been sent to some PEOs in error. However, IRS officials recently informed NAPEO that the letters were, in fact, legitimate. The IRS’s comments on this matter are reproduced verbatim below: The information provided to your community after our last meeting seems to have created some confusion. We would like to clarify that 105C letters sent to aggregate filers were intentionally issued, and taxpayers should be responding to them as normal to protect their rights. The IRS was looking into our internal guidance on handling responses from the aggregate filer community when a 105C letter was issued to ensure taxpayer responses were directed to employees who have expertise in these types of returns and that those employees had proper guidance on next steps in response to taxpayer submissions. We apologize for any confusion we may have created within your community and appreciate your help setting the record straight.

Key Resources

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NAPEO recently held its fourth monthly meeting with IRS officials to discuss the status of outstanding Employee Retention Tax Credit (ERTC) claims filed by PEOs and to receive updates on the agency’s examination process. This document reflects the most up-to-date information NAPEO has received from the IRS as of July 2026.

This document provides additional context and practical guidance for PEOs with outstanding Employee Retention Tax Credit (ERTC) claims. It reflects information shared with NAPEO by the IRS in June 2026 regarding processing status, documentation requirements and steps members can take to move claims forward.

This document provides additional context and practical guidance for PEOs with outstanding Employee Retention Tax Credit (ERTC) claims. It reflects information shared with NAPEO by the IRS in April 2026 regarding processing status, documentation requirements and steps members can take to move claims forward.

Small businesses throughout the country have reported significant delays in receiving the Employment Retention Tax Credit (ERTC) refund.

Thousands of employers across the country have claimed the employee retention tax credit (ERTC), an important form of payroll tax relief that Congress made available to certain employers for keeping their employees on the payroll during the COVID-19 pandemic.

Generally speaking, the Employee Retention Tax Credit (the “ERTC”) is a fully refundable tax credit applied to an employer’s portion of certain payroll taxes with two different calculations: one for 2020 and a second for 2021.

PEOs will likely be asked by many of their clients to claim the Employee Retention Tax Credit (the “ERTC”) on their behalf. Included are some best-practice considerations for PEOs set forth by NAPEO’s ERTC Working Group.

What is NAPEO Doing

Writing to Lawmakers

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NAPEO writes a letter to House Ways and Means and Senate Finance Committee leaders outlining tax code changes that will benefit small businesses and the PEOs that serve them, including addressing issues that plagued ERTC processing.

NAPEO intensifies its grassroots congressional letter campaign for both its members and their small business clients.

NAPEO sends a letter to federal lawmakers asking for continued oversight of the IRS as more than 637,000 ERTC claims still await processing. This letter also includes a one-page summary of the IRS’ announcements.

One-page summary of IRS’ announcements sent with letter to federal lawmakers asking for continued oversight of the IRS.

NAPEO President and CEO Pat Cleary sends a letter to IRS Commissioner Daniel Werfel asking that additional personnel assigned to clear the ERTC claims backlog are kept in place until all forms filed before 2023 are processed.

NAPEO sends a letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel ahead of Werfel’s appearance before the Senate Finance Committee the following day. We warn of the imminent dangers posed to small businesses as the logjam nears one million outstanding applications. NAPEO also submitted questions for the record on the ERTC backlog for Werfel’s hearing.

NAPEO President and CEO Pat Cleary sends letters to the House and Senate Small Business committees urging its members to put pressure on the IRS to clear out the backlog of ERTC claims.

NAPEO begins a grassroots letter writing campaign to Congress urging members to put pressure on the IRS to clear out the background of ERTC claims. NAPEO members and their clients send hundreds of letters to federal lawmakers.

Letter to Congress from NAPEO President and CEO Pat Cleary urging the House and Senate to put pressure on the IRS to clear out the backlog of ERTC claims.

Letter to IRS Counsel Rachel Levy urging that small businesses claiming the ERTC on Form 941-X should be subject to the same IRS level of review that is applied to other small businesses, regardless of whether the claim is reported on Schedule R by an aggregate filer, such as a PEO or CPEO.

Letter to Sec. Yellen and Comm’r Rettig regarding 941/941-X delays, ERTC, and offsets.

Letter to IRS Counsels Rachel Levy and Janine Cook regarding 941-X, ERTC.

Letter to the Secretary of the Treasury Janet Yellen and the IRS Commissioner Charles Rettig from NAPEO and three other trade associations (American Payroll Association, U.S. Chamber of Commerce, and American Institute of CPAs) to put more resources into processing ERTC claims.

Letter to Carol Weiser and Vicki Judson following up to 5/29/2020 NAPEO email.

Issuing Statements

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ALEXANDRIA, Va., December 11, 2024 – The National Association of Professional Employer Organizations (NAPEO) commended a coalition of lawmakers, including the Democratic leaders of the House and Senate, for …

ALEXANDRIA, Va., August 1, 2024 — The National Association of Professional Employer Organizations (NAPEO) implored the IRS to clear the spiraling backlog of legitimate Employee Retention Credit (ERTC) claims …

ALEXANDRIA, Va., June 21, 2024 — The National Association of Professional Employer Organizations (NAPEO) today urged the Internal Revenue Service to quickly process legitimate Employee Retention Credit …

ALEXANDRIA, Va., January 18, 2024 — The National Association of Professional Employer Organizations (NAPEO) commended Congress for advancing the bipartisan tax bill that provides vital Employee Retention Tax …

In response to a recent article in Politico Tax Pro which revealed that “tax writers are privately considering a crackdown on the Employee Retention Credit to help defray the cost of a long-sought tax bill …

Thousands of small businesses are at risk of financial harm or closure if the Internal Revenue Service (IRS) does not quickly process its now-record high backlog of legitimate Employee Retention Tax Credit (ERTC) …

The Internal Revenue Service’s (IRS) decision to pause new Employee Retention Credit (ERTC) claims should allow the agency to focus on processing legitimate claims and finally clear the backlog that has left …

March 17, 2023, Alexandria, VA – The National Association of Professional Employer Organizations (NAPEO) has intensified its campaign to clear the IRS’ growing tax credit backlog, warning Congress the inaction …

- January 7, 2025 – NAPEO President and CEO Casey Clark is featured in a Tax Notes article about ongoing ERTC discussions as the application deadline soon approaches. In it, he notes that a retroactive filing deadline “would be catastrophic for a lot of companies.”
- August 16, 2024 – In an op-ed published in The Hill , NAPEO President and CEO Casey Clark called on the IRS to expeditiously process its identified low-risk claims, including those submitted by PEOs, which have already been subject to additional layers of scrutiny to ensure accuracy and eligibility,
- May 22, 2024 – In an op-ed published in The Washington Times , NAPEO President and CEO Casey Clark says “we’ll continue to bang on the doors of Congress and the IRS” until the ERTC backlog is cleared.
- March 22, 2024 – NAPEO President and CEO Casey Clark is featured in PoliticoPro Morning Tax. “While those committing tax fraud should be prosecuted to the full extent of the law, legitimate claimants cannot continue to be held hostage to fraudulent ERTC claims. The IRS must expedite the processing of claims by law-abiding, tax-paying Americans,” he tells the publication.
- October 4, 2023 – NAPEO President and CEO Pat Cleary is featured in stories on the committee letter from both CNBC and the Washington Business Journal .
- September 14, 2023 – The IRS announces that it will immediately pause new ERTC claims so it can focus on ridding its growing accumulation of fraudulent claims. NAPEO President and CEO Pat Cleary’s response to this announcement is featured in MarketWatch .
- September 5, 2023 – The IRS announces it will slow the processing of ERTC claims as it grapples with an influx of fraudulent claims. NAPEO President and CEO Pat Cleary’s response to this announcement is featured in the Wall Street Journal .
- December 6, 2024 – A group of 11 New York lawmakers — led by Senate Majority Leader Chuck Schumer (D) and House Minority Leader Hakeem Jeffries — write the IRS urging for expedited ERTC claims processing and greater transparency in the program. In the letter, the Democratic leadership mentions the concerns of PEOs and PEO clients, and encourage the swift processing of PEO filings, as they have already been subject to additional layers of scrutiny to ensure accuracy and eligibility.
- August 16, 2024 – Virginia Sens. Tim Kaine (D) and Mark Warner (D) write a letter to the IRS demanding greater transparency about the status of ERTC claims that continue to languish. NAPEO President and CEO Casey Clark writes the lawmakers thanking them for their joint letter.
- October 3, 2023 – The House Ways and Means Committee sends a letter to IRS Commissioner Daniel Werfel demanding a plan from the agency on what is being done to clear the still-increasing backlog of ERTC claims following the September moratorium. NAPEO President and CEO Pat Cleary’s July testimony before the Ways and Means’ Oversight Subcommittee is featured prominently in the letter.
- July 31, 2023 – NAPEO President and CEO Pat Cleary is featured by the House Ways and Means Committee for his compelling testimony before its Oversight Committee the week prior.
- July 27, 2023 – NAPEO President and CEO Pat Cleary testifies before the House Ways and Means Oversight Subcommittee on the ERTC backlog’s harmful impacts on small and mid-size businesses. NAPEO issues a press release highlighting Pat’s testimony.
- July 25, 2023 – NAPEO launches ertcdelayshurtsmallbiz.com to show the firsthand impact the ERTC backlog has on small and mid-size businesses.
- June 22, 2023 – NAPEO survey of 43 members finds that 18,000 small business clients are still waiting for the IRS to approve at least $3 billion in ERTC credits filed before 2023.
- March 23, 2023 – Following the grassroots efforts of NAPEO, our members, and their clients, ten Republican members of the House Ways & Means Committee sent this letter to the new IRS commissioner requesting an ERTC status update by April 3.
- February 15, 2023 – NAPEO provides the staff of the Senate Finance Committee with background material and “ questions for the record ” on the ERTC for the confirmation hearing of Danny Werfel, the nominee to be the next Commissioner of the IRS.
- May 17, 2022 – NAPEO members met with 35 representatives and Senators to discuss the problems with the IRS processing Form 941-X and the harm this delay is causing their small business clients.
- April 27, 2022 – Meeting with House Ways and Means Oversight Subcommittee staff, to discuss ERTC delays and incorrect processing of tax credits taken by PEO clients.
- April 26, 2022 –Meeting with Senate Finance Committee staff to discuss ERTC delays and incorrect processing of tax credits taken by PEO clients.

More ERTC Guidance

Provided by the IRS

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Guidance on the early termination of the ERTC

Guidance for Q3/Q4 2021 and other miscellaneous ERTC issues

Safe harbor permitting employers to exclude certain amounts from gross receipts solely for determining eligibility for the ERTC

Recapture of excess employment tax credits under the Families First Act and the CARES Act

This is an archival or historical document and may not reflect current law, policies or procedures.

ERTC Background

The ERTC was created by the CARES Act in March 2020. It was extended and modified by the Consolidated Appropriations Act of 2021. Here’s how that law modified the ERTC.

The ERTC was modified again in March 2021 by the American Rescue Plan Act, which, among other changes, added the ERTC to the Internal Revenue Code (§ 3134) and extended it to Q3 and Q4 2021. As noted above, The Infrastructure Investment and Jobs Act (IIJA), which was signed into law on November 15, 2021, retroactively terminated the ERTC one quarter early for most employers so that the ERTC is generally not available with respect to wages paid on or after October 1, 2021. Employers that meet the definition of “recovery startup business” in Code § 3134, as amended by the IIJA, continue to be eligible to claim the ERTC for wages paid through December 31, 2021.

Employers that are no longer eligible for the ERTC in Q4 2021 but that (1) received an advance payment of the ERTC for Q4 using Form 7200 and/or (2) reduced their payroll tax deposits earlier in Q4 in anticipation of claiming the ERTC for Q4 should review the guidance in Notice 2021-65 (see link above) for information regarding repayment of those amounts.

The Infrastructure Investment and Jobs Act (Public Law 117-58) contains a provision that ends the Employee Retention Tax Credit (ERTC) at the end of the third quarter of 2021. Most employers should not claim any ERTC on the Form 941 for Q4 2021, with one exception for a “recovery startup business.” Employers that meet that definition could still claim the ERTC for Q4 2021 (if otherwise eligible).

Employers may continue to claim the ERTC for Q1-Q3 2021 if they are eligible.

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