Employee Retention Credit (ERC) Deadlines Tighten Under the One Big Beautiful Bill: What Businesses Need to Know

The Employee Retention Credit (ERC) has been one of the most discussed pandemic-era tax relief programs, providing significant support to businesses that kept employees on payroll during COVID-19. However, under the One Big Beautiful Bill (OBBBA), new restrictions now apply to when and how the IRS can process ERC claims — particularly those for the third and fourth quarters of 2021.

If your business filed or is considering filing for the ERC, it’s important to understand these new deadlines and rules — especially because many late claims will no longer be processed or refunded.

🔹 What Changed Under the One Big Beautiful Bill?

The new law prevents the IRS from allowing or refunding ERC claims filed after January 31, 2024 for the last two quarters of 2021.

In other words:
➡️ If your ERC claim for Q3 or Q4 of 2021 was filed after January 31, 2024, and you haven’t received a refund yet, the IRS will not process it after July 4, 2025 — even if your business was otherwise eligible.

This change aims to curb fraudulent or late ERC filings, which surged in 2023 and 2024 due to aggressive ERC promotion campaigns.

🔹 Does This Affect All ERC Claims?

No. If you filed your claim on or before January 31, 2024, your ERC request is not affected by these new limits. The IRS will continue to process legitimate and timely filed claims as usual.

🔹 What If I Already Received My ERC Refund?

If your business filed an ERC claim after January 31, 2024, but the IRS already issued your refund before July 4, 2025, you generally won’t receive a bill or have to repay it just because of this rule.
However, keep in mind — the IRS may still review ERC claims under normal compliance procedures to ensure eligibility and accuracy.

🔹 What If I Filed to Withdraw My ERC Claim?

If you filed your ERC claim on or before January 31, 2024, but later submitted an amended return to withdraw it after that date, the IRS will still process your withdrawal.
This helps businesses that realized they no longer qualified or were advised by their CPA to retract an earlier claim to avoid penalties.

🔹 Can I Still File a New ERC Claim for Late 2021?

Unfortunately, no. Under the new rules, the window to file new ERC claims for the third and fourth quarters of 2021 has closed. Claims submitted after January 31, 2024, will not be processed or refunded by the IRS.

🔹 When Is a Return Considered “Filed”?

A return is considered filed on time if it was postmarked or submitted electronically to the IRS by January 31, 2024. If it was sent later, it’s considered late and therefore not eligible under the new rules.

🔹 What If My ERC Was Just One Part of My Return?

If your return included both an ERC claim and other items (like income or payroll adjustments), the IRS can still process those non-ERC items. Only the ERC portion is restricted under the new law.

🔹What If My ERC Claim Is Denied — Do I Have Appeal Rights?

Yes. If your ERC claim is disallowed, the IRS will send you Letter 105-C: Claim Disallowed.
You can appeal if you believe your claim was filed on time and denied in error. At this point, professional representation is key — a CPA familiar with ERC rules can help you prepare documentation, communicate with the IRS, and protect your position.

Example:

A Los Angeles Shopify store owner filed an ERC claim in March 2024 for wages paid in late 2021. Because it was filed after the January 31, 2024 deadline, the IRS will not process or refund that claim after July 4, 2025 — even if the business meets all eligibility rules.

On the other hand, a dental practice that filed its ERC claim on January 15, 2024, is not affected by this rule and can still receive its credit if approved.

What Businesses Should Do Now

If you or your business claimed the ERC — or are unsure when your claim was filed — now is the time to review your filing history. Businesses should also be cautious about third-party ERC promoters still advertising late filings.

At Velin & Associates, Inc., we help:

• Medical professionals and dental practices ensure ERC compliance
• Creators, YouTubers, and online sellers (Amazon, Shopify, TikTok) verify proper payroll credits
• High-net-worth individuals and business owners protect against potential IRS adjustments

We can help you determine whether your ERC was filed correctly and advise on next steps if your claim may be impacted by the new restrictions.

Contact Velin & Associates, Inc.

Let our experienced CPAs help you navigate these complex changes. For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

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