ERC Claims After the Filing Deadline: What Employers Should Know Now

The Employee Retention Credit (ERC) is a refundable tax credit that was designed to help organizations keep their employees on payroll during the COVID-19 pandemic. The deadline to file a claim was April 15, 2024 for the 2020 ERC and April 15, 2025 for the 2021 ERC. Under the One Big Beautiful Bill Act that was signed on July 4, 2025, the Q3 and Q4 2021 ERCs have an updated deadline of January 31, 2024.

While the ERC filing window has closed, for many employers, the real work — defending, withdrawing, or accounting for existing claims — is still ongoing.

As of August 1, 2026, the IRS reports they have approximately 17,300 ERC claims 20,600 remaining ERC claims across several stages, including review, audit, pending payment or disallowance, disallowance response review, and appeals.

Because of widespread concerns about improper or fraudulent ERC claims, the IRS continues to rigorously evaluate ERC claims and expects employers to substantiate their eligibility and documentation when requested. Employers with pending or previously paid claims should maintain thorough records, review their eligibility position, and respond carefully to any IRS correspondence.

Who Qualifies for the ERC?

The ERC's eligibility requirements were complex and varied across 2020 and 2021. The credit was generally available to businesses, nonprofit organizations, and for 2021 specific governmental entities who qualified based on:

• A full or partial suspension of operations due to a government order limiting commerce, travel, or group meetings related to COVID-19.
• A significant decline in gross receipts compared to the same quarter in 2019.
• Recovery startup business status in limited circumstances.

How the ERC is Calculated

The Employee Retention Credit equals 50% of up to $10,000 in qualified wages 50% of up to $10,000 in qualified wages per employee for all of 2020 (maximum $5,000 per employee) and 70% of up to $10,000 in qualified wages per employee, per quarter, in 2021 (maximum $7,000 per employee per quarter, or up to $21,000 per employee for the year).

Qualifying Wages

Qualifying wages include not only compensation paid to each employee, but the allocable portion of their health care costs as well.

Withdrawing an Erroneous ERC Claim

The IRS has identified widespread concerns about improper or fraudulent ERC claims, and as a result, launched efforts to address fraud, educate about erroneous claims, and help employers resolve improper claims without penalty. Perhaps the most notable example of these efforts was the ERC Voluntary Disclosure Program (VDP), which ran from December- March 2024. Under the VDP, eligible participants returned 80% of the ERC received, retaining 20% of the credit and avoiding civil penalties and interest. There was also a second ERC Voluntary Disclosure Program, which closed November 22, 2024.

Employers who filed erroneous claims can still use the IRS ERC claim withdrawal process, provided all of the following apply:

• The claim was made on an adjusted employment tax return (Form 941-X, 943-X, 944-X, or CT-1X).
• The adjusted return was filed solely to claim the ERC, with no other adjustments.
• You want to withdraw the entire amount of the ERC claim.
• The IRS has not paid the claim, or if paid, the refund check has not been cashed or deposited.

What to Do if Your ERC Claim is Disallowed

Employers that receive an IRS disallowance letter should pay close attention to response deadlines. In general, taxpayers have two years from the date of Letter 105-C or 106-C to resolve the claim administratively or file a refund suit.

Appealing the disallowance does not automatically extend that two-year deadline. In 2026, the IRS introduced a streamlined process for certain taxpayers to request more time through Form 907 if they are still waiting for IRS review and have six months or less remaining before the deadline expires.

Income Tax Considerations

Employers that claimed ERC should make sure they have properly reported the ERC on their income tax return. On March 20, 2025 the IRS released new FAQs stating that taxpayers that didn’t previously reduce their wage expense by the ERC could instead record the ERC in the year the funds are received. Additionally, if the taxpayer had reduced their wage expense on a previously filed tax return and the taxpayer later finds out that the IRS has disallowed their ERC claim, the taxpayer can reduce their wage expense in the year of the final disallowance.