Key Updates for Tax Professionals
The IRS has released a new set of Frequently Asked Questions (FAQs) addressing recent changes to the Employee Retention Credit (ERC) for the third and fourth quarters of 2021. These updates clarify how new rules under the One, Big, Beautiful Bill Act affect refund eligibility and filing deadlines.
These FAQs are intended to provide timely guidance for taxpayers and tax professionals. While they are not official legal authority and may be updated over time, the IRS notes that taxpayers who reasonably and in good faith rely on the information will not face penalties under reasonable cause standards, even if later updates modify the interpretation.
Important Note
Because these FAQs are not published in the Internal Revenue Bulletin, they cannot be relied upon as precedent in resolving cases. However, the IRS will maintain dated versions of all updates on IRS.gov so taxpayers and preparers can reference prior versions if needed.
ERC Limitation FAQs for the Third and Fourth Quarters of 2021
Q1. How did the One, Big, Beautiful Bill Act (OBBBA) change the Employee Retention Credit (ERC)?
A1. The OBBBA introduced new compliance measures that directly impact the ERC. Specifically, Section 70605(d) of the Act prohibits the IRS from allowing or refunding ERC claims filed after January 31, 2024, for the third and fourth quarters of 2021, after July 4, 2025.
This applies even if the taxpayer otherwise met eligibility criteria. The legislation also strengthens enforcement by imposing penalties on ERC promoters who fail to follow due diligence standards when assisting with claims.
Q2. Do these limitations apply to all ERC claims for the third and fourth quarters of 2021?
A2. No. The restriction only applies to new ERC claims filed after January 31, 2024. Claims filed on or before that date are not affected by this rule.
Q3. What if I filed my ERC claim for those quarters after January 31, 2024, and already received my refund?
A3. In most cases, no additional IRS action will be taken. If your claim was filed after January 31, 2024, and refunded before July 4, 2025, Section 70605(d) does not apply.
However, your claim may still be subject to normal IRS compliance reviews or adjustments.
Q4. What if I filed an ERC claim before January 31, 2024, but later submitted an amended return withdrawing it?
A4. The limitation under Section 70605(d) does not apply to amended returns that withdraw previously claimed ERCs. The IRS will continue to process those withdrawals.
Q5. Can I still file an ERC claim for the third or fourth quarter of 2021 if I missed the January 31, 2024 deadline?
A5. Unfortunately, no. Under Section 70605(d), ERC claims for those quarters filed after January 31, 2024, will not be allowed or refunded once the July 4, 2025 enforcement date takes effect.
Q6. When is a tax return considered “filed” for purposes of this rule?
A6. A return claiming an ERC is considered filed on or before January 31, 2024, if it was postmarked or electronically submitted to the IRS by that date.
Q7. If my ERC claim is disallowed, will the IRS still process other items on my return?
A7. Yes. If your ERC claim is denied under Section 70605(d), the IRS can still process other unrelated items included on your return as appropriate.
Q8. Can taxpayers appeal if an ERC claim is denied under Section 70605(d)?
A8. Yes. Taxpayers who receive Letter 105-C (Claim Disallowed) may appeal the decision through the IRS Independent Office of Appeals.
If you believe your claim was timely filed on or before January 31, 2024, and was incorrectly denied, you can submit documentation supporting your case. Additional guidance on how to respond can be found at IRS.gov/erc105c.
What Tax Professionals Should Do Next
For tax professionals, understanding these updates is essential when advising clients with pending or amended ERC claims.
Here are a few key action points:
- Verify that any ERC claims for 2021 were filed by the January 31, 2024 deadline.
- Advise clients that new ERC filings for Q3 or Q4 of 2021 are no longer permitted.
- Stay informed on updates through IRS.gov, as FAQs may be revised over time.
- Help clients maintain proper documentation in case of IRS review or appeal.
Stay Ahead with Swift Financial Partners
At Swift Financial Partners, we help tax professionals stay informed and compliant with the latest IRS guidance.
If you have questions about ERC claims, tax law changes, or preparing for the upcoming tax season, our experts are here to help.
Before you can file returns, you need an EFIN (Electronic Filing Identification Number) from the IRS. The application can feel overwhelming—but we make it easy.
Our team provides step-by-step, one-on-one guidance to help you get approved fast—at no cost to you. With our Free EFIN program, you’ll be ready to e-file with confidence this tax season.
Get your Free EFIN Assistance here.
Before you can file returns, you need an EFIN (Electronic Filing Identification Number) from the IRS. The application can feel overwhelming—but we make it easy.
Our team provides step-by-step, one-on-one guidance to help you get approved fast—at no cost to you. With our Free EFIN program, you’ll be ready to e-file with confidence this tax season.
