The Employee Retention Credit is closed. What matters now if you claimed one

If you are looking into the Employee Retention Credit, the filing windows have closed. Claims for the 2020 quarters had to be filed by April 2024, and claims for the 2021 quarters by April 2025. There is no route to a new claim, and anyone offering to file one for you is selling something that cannot be done.

What is still live is everything downstream of a claim already made. Claims filed near the deadline are still working through a backlog. Disallowance letters are still going out with short response windows attached. Examinations are running on claims that were paid years ago. And there is an income tax consequence that a large share of claimants never dealt with, which is quietly the most common unresolved ERC problem.

Here is where each of those stands and what to do about them.

The claim windows closed in 2024 and 2025

The credit covered wages paid from March 2020 through the third quarter of 2021 for most employers, with a narrow extension into the fourth quarter for recovery startup businesses. It was claimed on the quarterly employment tax return, or retroactively by amending on Form 941-X.

Those amended returns had deadlines. The general limitation period gave until April 2024 for the 2020 quarters and April 2025 for the 2021 quarters. Both have passed.

One point of history worth correcting, because it is widely misstated: the Infrastructure Investment and Jobs Act did not extend the ERC. It ended it early, removing the fourth quarter of 2021 for most employers after many had already started claiming it.

If your claim is still pending

The IRS stopped processing new claims in late 2023 in response to a large volume of questionable filings, and resumed on a selective basis afterwards. Claims filed late in the window are still moving slowly.

Two outcomes are common. The claim is paid, sometimes with interest. Or the IRS issues a disallowance notice, Letter 105-C, rejecting it in full or in part.

A disallowance letter has deadlines attached, and they are short relative to how long you waited. You can request an appeal, and you retain the right to sue for refund within a defined period after the disallowance. Both of those windows run from the date on the letter, not from when it reached you. Given how many of these went to addresses that were current in 2021 and are not now, the letter arriving late is a real risk rather than a theoretical one.

Do not assume a disallowance is correct. A significant number were issued in batches on broad criteria, and a documented claim can survive the challenge.

The income tax return almost nobody amended

This is the live issue most claimants do not know they have.

Wages used to claim the ERC cannot also be deducted as a wage expense. The credit is not simply free money layered on top of an unchanged return. If you claimed the credit for wages paid in 2020 or 2021, your income tax return for that year overstates your deduction by the amount of the credit, and it needs to be amended to reduce the wage deduction.

The timing rule catches people out. The reduction applies to the year the wages were paid, not the year the refund arrived. A company that received an ERC refund in 2024 for 2021 wages has to amend its 2021 return, not adjust its 2024 one.

Many claimants, particularly those who used contingency fee promoters, were never told this. The promoter filed the 941-X, took its percentage, and had nothing to do with the income tax return. The result is a set of open years with overstated deductions and a liability that grows with interest while it sits.

Sorting this out means amending the right year, with the credit allocated correctly across periods, and dealing with the notices that follow. We handle US returns and amendments alongside the bookkeeping the adjustment runs through, which is the arrangement where the credit and the income tax treatment are looked at together rather than by two parties who never spoke.

If you were not actually eligible

Two IRS programs existed for unwinding a claim on favorable terms. A withdrawal process for claims not yet paid, and voluntary disclosure programs allowing repayment of part of the credit without penalties. Those programs have closed.

What remains is the ordinary route: amend the employment tax return to reduce or remove the credit, repay what was received, and deal with interest. Doing this before an examination starts is materially better than doing it afterward, both for penalty exposure and for how the position is characterized.

If a promoter prepared the claim, the fee is usually not recoverable, and the taxpayer is the one liable for the repayment. That asymmetry was the structural problem with contingency fee credit work throughout, and it is why the same arrangement deserves scrutiny in any credit context.

What an examination looks at

If a claim is examined, a few issues account for most of the adjustments.

The partial suspension test. A government order had to more than nominally suspend operations. Reduced demand, general economic disruption, and customer caution do not qualify. Many claims rest on characterizations of orders that did not actually restrict the business.

Supply chain disruption. This was heavily marketed as a qualifying basis and the IRS position is that it rarely qualifies. It requires that a supplier was itself subject to a government order that suspended its operations, and that this suspended yours. The evidentiary burden is on you and it is substantial.

Gross receipts decline. The 2020 test required a decline of more than 50% against the comparable 2019 quarter. The 2021 test was more generous at more than 20%. Claims that applied the wrong threshold to the wrong year are common.

Owner wages. Wages paid to a majority owner and to certain of their relatives are generally not qualified wages. Claims for owner-operated companies that included the owners' own compensation are a frequent adjustment, and they were a staple of promoter filings.

Employee count. The size of the workforce determined whether all wages qualified or only wages paid for time not worked, with different thresholds in 2020 and 2021. Getting this wrong changes the size of the claim substantially.

Extended assessment periods mean this is not over

The normal assessment window for employment tax is three years, but the period for the third and fourth quarter 2021 credits was extended to five, and there has been legislative attention to extending it further for ERC claims specifically.

The practical consequence is that a claim paid in 2023 or 2024 can still be examined for some time yet. If you claimed the credit and have not revisited it, the useful move is to assemble the support now, while records and the people who prepared them are still available, rather than after a notice arrives.

The bottom line

No new ERC claims are possible, so the only questions left are about claims already made. If yours is pending, watch for a disallowance letter and treat its response window as running from the date printed on it. If you received the credit and never amended the income tax return for the year the wages were paid, that is an open liability accruing interest and it is worth fixing before the IRS raises it. If the claim itself was weak, unwinding it voluntarily is better than being examined, even though the favorable repayment programs have closed. And keep the substantiation, because the assessment window on some of these runs longer than the usual three years.

Frequently asked questions

Can I still claim the Employee Retention Credit?

No. The deadline for 2020 quarters was April 2024 and for 2021 quarters April 2025. Both have passed and there is no extension. Any service offering to file a new ERC claim is offering something that is no longer possible.

I received an ERC refund. Do I need to amend my income tax return?

Yes, if you have not already. Wages used to claim the credit cannot also be deducted, so the income tax return for the year those wages were paid has to be amended to reduce the wage deduction. The adjustment goes to the wage year, not the year the refund arrived.

What is Letter 105-C?

It is the IRS notice disallowing a claim in whole or in part. It carries appeal rights and a period within which you can bring a refund suit, both running from the date on the letter. Disallowances were issued in volume on broad criteria, so a well-documented claim is worth contesting rather than accepting.

Can I still withdraw a claim or use the voluntary disclosure program?

Those programs have closed. The remaining route is to amend the employment tax return to reduce or remove the credit and repay what was received with interest. Doing this before an examination begins is better for penalty exposure than doing it after.

Were owner wages eligible for the ERC?

Generally not. Wages paid to a majority owner and to certain related individuals are excluded from qualified wages. Claims that included owner compensation are among the most common adjustments on examination, and they appeared frequently in promoter-prepared filings.

How long can the IRS examine an ERC claim?

The usual employment tax assessment period is three years, but it was extended to five for the third and fourth quarter 2021 credits, and there has been legislative interest in extending it further. A claim paid recently can still be reviewed for some time, which is why keeping the supporting documentation matters.