On the February 3 IRS payroll industry conference call, Debera Salam, Director of Payroll Information and Process Services for Ernst & Young LLP, informed the IRS that several of her clients who recently filed Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, to claim the payroll tax exemption in the Hiring Incentives to Restore Employment Act (HIRE Act, P.L. 111-147) had received letters from the IRS stating that there was a backlog in processing these returns and that the returns may not be processed for several months. The payroll tax exemption relieves employers from their share of OASDI taxes (6.2% rate) on wages paid to certain new hires from March 19, 2010 to Dec. 31, 2010. The exemption could not be claimed on Form 941 until the second quarter of 2010. Some employers amended their returns using Form 941-X, rather than claiming the exemption on an original Form 941.
The IRS delay in processing the returns was a concern for employers because they have reduced their payroll tax deposits to take into account the credit. Employers were worried that they could receive an IRS notice proposing a federal tax deposit penalty if their amended return was not taken into account.
On the March 3 IRS payroll industry conference call, Shelley Dockstader, National Account Manager in IRS Electronic Tax Administration, informed participants that the IRS is now up-to-date in processing these returns.