Is the ERC Still Available: Deadlines, Claims, and Audit Risk

The Employee Retention Credit is no longer available for new claims. The final filing deadline, April 15, 2025, for wages paid in 2021, has passed, and the 2020 deadline closed a year earlier on April 15, 2024. On top of those cutoffs, the One Big Beautiful Bill Act signed on July 4, 2025, blocks payment on certain late-filed 2021 claims even when the employer would otherwise have qualified. What remains active is the back end of the program: hundreds of thousands of previously filed claims still sitting in the IRS pipeline, denials moving through appeals, withdrawal requests, and an extended audit window for employers who already received the money.

The Deadlines That Closed the Window

Federal law gives employers three years from the date they filed an original quarterly employment tax return to submit an amended return requesting a refund.¹ Because 2020 quarterly returns were filed by April 15, 2021, the three-year window for 2020 ERC claims closed on April 15, 2024. For 2021 quarters, the original returns were due by April 15, 2022, so that window closed on April 15, 2025.² Both dates have passed, and there is no mechanism to file a new ERC claim.

The One Big Beautiful Bill Act added a separate cutoff aimed specifically at the third and fourth quarters of 2021. Under Section 70605(d), the IRS cannot allow or refund any ERC for those two quarters if the claim was filed after January 31, 2024, even if the employer otherwise met the eligibility tests.³ A claim counts as timely under this rule only if it was postmarked and properly mailed to the correct IRS office by that date. Employers whose Q3 or Q4 2021 filings arrived after January 31, 2024, receive Letter 105-C denying the claim.

What’s Happening to Claims Already Filed

The IRS put a moratorium on processing new ERC submissions in September 2023 after identifying widespread fraud and aggressive promoter marketing that pushed businesses into claims they didn’t qualify for.⁴ That pause let the agency build screening tools to separate legitimate claims from questionable ones.

As of early 2025, more than 597,000 ERC claims remained unprocessed in the IRS inventory.⁵ The agency began paying out low-risk claims in late 2024 and has been working through filings submitted between September 14, 2023, and January 31, 2024, focusing on the highest- and lowest-risk items first.² Claims that raise risk flags get additional review, and the IRS may request supporting documentation before deciding. The Taxpayer Advocate Service has estimated that clearing the backlog could run through the end of 2025 or beyond.

If you have a claim pending, expect quarter-by-quarter results. The IRS may approve some quarters while continuing to review others, because eligibility can differ from one quarter to the next depending on whether a government order was still in effect or whether gross receipts had recovered.

If You Already Received the Credit

Getting an ERC refund creates an income tax obligation that surprises many employers. The IRS requires you to reduce your deductible wage expense on your income tax return by the amount of ERC received for the same period.² If you received $100,000 in ERC for 2021 wages, your 2021 wage deduction drops by $100,000, and your taxable income for that year goes up accordingly.

Two ways to handle the adjustment. The preferred approach is to amend the income tax return (Form 1040, 1065, 1120, or whichever applies) for the year the qualified wages were paid. Alternatively, if you did not reduce wages on the original income tax return and the ERC was paid in a later year, you can include the overstated wage expense as gross income on the return for the year the refund arrived.² So a refund received in 2025 can be picked up as income on the 2025 return instead of forcing an amendment of 2021.

Any interest the IRS pays on a delayed refund is separately taxable, reportable in the year you receive the check. Budget for both the wage-deduction reduction and the interest income when planning around a pending refund.

If Your Claim Was Denied

Denials arrive on Letter 105-C. The letter explains why the claim was disallowed and lays out how to challenge the decision. The IRS suggests responding within 30 days to protect the timeline, though the actual deadline for further action is longer.⁶

Two paths are available if you disagree:

Request an appeal to the IRS Independent Office of Appeals within two years of the date on Letter 105-C. The IRS first reviews your response and documentation; if it agrees the evidence supports the credit, it processes the claim without sending it on. If it disagrees, it forwards the case to Appeals and notifies you by Letter 86-C.⁶
File suit in U.S. District Court or the U.S. Court of Federal Claims within two years of the date on Letter 105-C. Requesting an appeal does not extend this window. If the two-year deadline is approaching before the appeal is resolved, you can either file suit or sign Form 907 to extend the period by written agreement with the IRS.⁶

When you respond, include documentation supporting at least one eligibility factor for each disputed quarter: the government order that suspended operations, the decline in gross receipts, or recovery startup business status. If timeliness was the stated reason for denial, provide evidence such as a certified mail receipt showing the claim was postmarked before the applicable deadline.

If You Shouldn’t Have Filed

Employers who now suspect their claim was filed incorrectly, often because a promoter pushed them into ineligible territory, can still withdraw the claim if the IRS has not yet paid it or if a refund check was issued but not cashed. As of early 2026, the withdrawal program remains active.⁷ A withdrawn claim is treated as if it were never filed, and the IRS will not impose penalties or interest on it.

All of the following must be true to use the withdrawal process:

The claim was filed on an adjusted employment tax return, such as Form 941-X.
No other adjustments were made on that return; it was filed solely to claim the ERC.
You want to withdraw the entire claim amount, not just reduce it.
The IRS has not paid the claim, or you have not cashed or deposited the refund check.⁷

To withdraw, copy the adjusted return, write “Withdrawn” in the left margin of the first page, and have an authorized person sign and date the right margin. If you have not been notified of an audit, fax the signed copy to the IRS at 855-738-7609. If you are under audit, submit the withdrawal through your assigned examiner. Employers holding an uncashed refund check should write “Void” on the back and mail it with the withdrawal request to the Cincinnati Refund Inquiry Unit.⁷

One boundary worth flagging: the IRS also ran a Voluntary Disclosure Program for employers who had already received and deposited an ERC refund, allowing them to repay 85 percent in exchange for waived penalties, interest, and the income tax amendment obligation. That program closed on November 22, 2024, and is no longer available.⁸ If you received and deposited a refund you shouldn’t have, withdrawal is off the table and repayment options now run through ordinary amended-return and audit channels.

Audit Exposure for Employers Who Did File

The One Big Beautiful Bill Act extended the IRS’s audit window for ERC claims to six years across all applicable quarters. The six-year period runs from the latest of: the date the original return was filed, the date it is treated as filed under the tax code, or the date the ERC claim was submitted. An employer who filed a claim in 2023 could face an audit as late as 2029.

Filing a false or fraudulent return to claim the credit is a felony punishable by a fine of up to $100,000 (up to $500,000 for corporations) and up to three years in prison.⁹ The IRS has active criminal investigations targeting both employers who knowingly filed false claims and the promoters who encouraged them, and the One Big Beautiful Bill Act added new penalties on promoters who failed to meet due-diligence requirements when assisting with ERC filings.³

Legitimate filers should keep the full paper trail for at least six years after the claim was filed: payroll records, the specific government orders relied on, gross receipts calculations by quarter compared to 2019 baselines, PPP loan forgiveness records showing which wages were allocated where, and any correspondence with the promoter or preparer who assisted with the claim. If the IRS opens an audit, it will look for documentation supporting one of the eligibility tests on a quarter-by-quarter basis, and it will check whether wages were double-counted against PPP forgiveness, restaurant revitalization grants, or shuttered venue grants. Wages counted as payroll costs for PPP forgiveness cannot also count as qualified wages for the ERC,¹⁰ and only W-2 wages qualify; amounts paid to independent contractors on Form 1099-NEC are excluded.²

1
Office of the Law Revision Counsel. 26 U.S. Code 6511 – Limitations on Credit or Refund
2
Internal Revenue Service. Frequently Asked Questions About the Employee Retention Credit
3
Internal Revenue Service. IRS Frequently Asked Questions (FAQs) Address Employee Retention Credits Under ERC Compliance Provisions of the One Big Beautiful Bill
4
Taxpayer Advocate Service. TAS Tax Tip: Waiting on an Employee Retention Credit Refund?
5
Taxpayer Advocate Service. The ERC Claim Period Has Closed – The IRS Must Now Prioritize Resolution, Communication, and Taxpayer Protections
6
Internal Revenue Service. Understanding Letter 105-C, Disallowance of the Employee Retention Credit
7
Internal Revenue Service. Withdraw an Employee Retention Credit (ERC) Claim
8
Internal Revenue Service. Employee Retention Credit – Voluntary Disclosure Program
9
Office of the Law Revision Counsel. 26 USC 7206 – Fraud and False Statements
10
Office of the Law Revision Counsel. 26 USC 3134 – Employee Retention Credit for Employers Subject to Closure Due to COVID-19