New IRS Fact Sheet Addresses Employee Retention Credit (ERC) Compliance

The Internal Revenue Service (IRS) recently published a Fact Sheet that addresses its ongoing efforts to target improper Employee Retention Credit (ERC) claims. The ERC was a pandemic-era program that provided significant tax benefits to eligible businesses. But, while eligible businesses were initially allowed to claim the credit retroactively into 2025, the One Big, Beautiful Bill (OBBB) retroactively revised the filing deadline to January 31, 2024. Learn more from Boston IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

OBBB Retroactively Revises ERC Filing Deadline to January 31, 2024

After multiple extensions, the window to file an ERC claim finally closed on April 15, 2025. Prior to the enactment of the OBBB, as long as an eligible business filed an ERC claim before this deadline, the business was eligible to receive a credit or refund in accordance with the ERC program’s terms.

However, under the OBBB, ERC claims filed after January 31, 2024 are no longer eligible for credits or refunds. As the IRS explains in its Fact Sheet:

“The . . . OBBB . . . prevents the IRS from allowing or refunding ERCs after July 4, 2025, for the third and fourth quarters of 2021 if those claims were filed after January 31, 2024, even if [a business] otherwise met eligibility requirements.”

While the IRS' Fact Sheet states that businesses that received a credit or refund before July 4, 2025 (for the third and fourth quarters of 2021) are not required to repay the IRS, it is silent regarding credits or refunds received after this date. The IRS’ Fact Sheet also does not address credits or refunds for 2020 or the first half of 2021.

Thus, while the IRS’ Fact Sheet provides some guidance, taxpayers whose ERC claims are not invalidated by the OBBB must still make informed decisions about whether they may be at risk. The IRS’s Fact Sheet also emphasizes the IRS’ ongoing efforts to target ERC fraud, and we have seen a high level of enforcement activity in this area throughout 2025.

ERC Fraud Allegations Can Expose Businesses and Their Owners to Substantial Penalties

The IRS’ ongoing efforts to target ERC fraud encompass all forms of fraud under the program—from submitting claims for ineligible businesses to falsifying payroll records and other documentation. Although most IRS inquiries are civil in nature, IRS Criminal Investigation (IRS CI) pursues criminal charges when warranted.

While businesses already under IRS scrutiny must defend themselves effectively during an audit or investigation, those not yet under scrutiny have options to proactively come into compliance. Depending on the circumstances, these options may include filing an amended return or submitting a voluntary disclosure, among others.

Request a Call with Boston IRS Tax Lawyer Kevin E. Thorn

If you have concerns about your business’ ERC filings (or if the IRS is looking into your business’s ERC filings), we encourage you to contact us promptly for more information. To request a call with Boston IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 617-692-2989 or contact us confidentially online today.