Thousands of businesses waiting years for Employee Retention Credit (ERC) payments may finally see relief after a significant change to how the Internal Revenue Service processes disputed claims.
Vensure Employer Solutions announced that it helped facilitate a new IRS approach that allows approved portions of ERC claims to be paid while disputed portions move through the appeals process. The change addresses a longstanding bottleneck that has delayed payments for businesses participating in Professional Employer Organization (PEO) payroll programs.
The development could have broad implications across the PEO industry, which includes more than 500 firms supporting over 230,000 businesses nationwide.
A Major ERC Processing Roadblock Gets Addressed
The Employee Retention Credit was introduced during the COVID-19 pandemic to help businesses retain workers amid economic disruptions. While many employers qualified for substantial tax credits, payment delays have become a persistent challenge across the industry.
Under the previous process, ERC claims submitted through PEOs were often grouped together. If a single claim within a larger batch triggered an audit or review, the entire group of claims could be delayed, leaving hundreds or even thousands of businesses waiting for funds regardless of whether their individual claims were valid.
In some cases, businesses have reportedly been waiting since 2021 for resolution.
The new bifurcation approach changes that dynamic.
Rather than holding all claims until every disputed issue is resolved, the IRS can now separate approved portions from those under review. Valid claims can move forward for payment while contested elements proceed through the appeals process independently.
For businesses facing cash flow pressures, the distinction could significantly reduce wait times for funds that have already been approved.
Why the Change Matters for Employers
The ERC backlog has become a major concern for small and mid-sized businesses over the past several years.
Many organizations anticipated using ERC refunds to support hiring initiatives, workforce expansion, technology investments, or general business operations. Instead, prolonged delays forced some employers to seek alternative financing, reduce spending plans, or rely on reserve capital.
By enabling partial payment, the new process gives employers earlier access to funds while preserving the IRS’s ability to review disputed claims.
“From the beginning, we saw that the process was creating unnecessary barriers for businesses that had done everything right,” said Kara Childress, President and CFO of VensureHR.
According to Childress, the bifurcation model creates a more practical balance between compliance oversight and timely access to relief funds.
The approach also reduces the risk that compliant businesses become collateral damage in broader audits affecting unrelated claims.
The Broader Impact on the PEO Industry
The change is particularly important for Professional Employer Organizations, which process payroll, benefits administration, compliance, and HR functions on behalf of client companies.
Because PEOs often submit claims on behalf of large groups of businesses, delays affecting a single filing can ripple across hundreds of employers.
The new process introduces greater flexibility and may help restore confidence among businesses that have grown frustrated with lengthy processing timelines.
It also represents a notable example of industry collaboration influencing administrative policy.
According to Vensure, the company worked directly with IRS stakeholders and legal counsel to help advance the bifurcation framework and address structural issues that were slowing payments.
A Long-Running Policy Challenge
The announcement builds on broader efforts to reduce ERC processing delays.
In 2025, Vensure engaged with policymakers in Washington, D.C., advocating for reforms designed to address a backlog that reportedly included nearly 600,000 unprocessed ERC claims.
The ERC program itself has faced increased scrutiny in recent years as the IRS sought to combat fraudulent filings while simultaneously processing legitimate claims.
That balancing act created significant challenges for businesses with valid applications caught in extended review cycles.
The bifurcation approach suggests regulators are exploring ways to maintain compliance oversight without unnecessarily delaying approved claims.
For employers still awaiting ERC payments, the move could signal a more efficient path forward.
What It Means for Workforce Planning
While the ERC was originally created as pandemic-era relief, the delayed funds continue to affect workforce decisions years later.
Access to previously approved credits could help businesses invest in hiring, employee retention, workforce development, compensation programs, and operational growth initiatives that were postponed during the waiting period.
For HR leaders and business executives, the change highlights how government administrative processes can have a direct impact on workforce strategy and financial planning.
As organizations continue navigating economic uncertainty, improved access to earned tax credits may provide additional flexibility to support growth and workforce investments.
The broader takeaway is clear: administrative efficiency matters. Even well-intentioned relief programs can lose effectiveness when businesses face years-long delays in accessing approved funds.
With the IRS now allowing approved ERC claims to move forward independently, employers may finally begin receiving relief that has been tied up in the system for far too long.
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