Are You Owed Interest on Your ERC Refund?

The Employee Retention Credit (ERC) was a refundable federal payroll tax credit created to help employers keep workers on payroll during COVID-19. It delivered millions in relief to production companies — but many still haven't received everything they're owed.

When the IRS takes longer than expected to issue a refund, it's required to pay interest on top of the original amount. For most businesses, this is straightforward: they file payroll taxes directly with the IRS and receive refunds directly. In entertainment, it's more complicated.

Why ERC refunds get complicated in entertainment

Most film, TV, and commercial productions don't handle payroll themselves — they use an entertainment payroll service that acts as the Employer of Record (EOR). This means:

• The payroll provider files employment taxes under its own tax ID (EIN)
• ERC claims are submitted on the production company's behalf
• The IRS pays the payroll provider directly — not the production company
• The provider is then responsible for passing both the refund and any interest along to you

​​Most ERC claims were also filed retroactively through amended payroll tax returns (Form 941-X) for eligible 2020–2021 quarters, which added another layer of complexity and delay.

The bottom line: production companies are entirely dependent on their payroll provider for the timing and accuracy of ERC payments — including interest.

What the IRS owes you

Under federal law (IRC §6611), the IRS is required to pay interest on delayed refunds. A few important things to understand:

• Interest is separate from the credit itself. It accrues on top of your ERC principal and is calculated independently.
• Rates change quarterly. The IRS publishes its interest rates every quarter, and the rate that applies to you depends on whether you're a corporate or non-corporate filer. Many payroll providers are structured as LLCs, which may qualify for higher non-corporate interest rates
• There's an interest-free window. The IRS typically doesn't owe interest for the first ~45 days while it processes the refund, so interest doesn't start from day one.
• It's taxable income. If you received interest, it should have been reported to you on a Form 1099-INT. If you didn't receive one and aren't sure why, that's worth looking into.

Where production companies lose money

Two issues come up consistently when ERC payments are audited:

1. Delayed remittance reduces your interest. Interest stops accruing when the EOR is paid-not when you are. Months of delay can mean lost value.‍
2. Interest is underpaid or missing entirely. ERC interest calculations are complex and often opaque. Without clear documentation, discrepancies can go unnoticed.