The Internal Revenue Service issued frequently asked questions in Fact Sheet 2025-07 relating to the limitation on credits and refunds for Employee Retention Credits claimed for the third and fourth quarters of 2021 that were filed after January 31, 2024. This limitation was enacted under the One, Big, Beautiful Bill.
The FAQs discuss the limitation generally, when a claim is considered to be timely filed, and what appeals rights are available if an ERC claimed on a return is disallowed.
Q1. How did the One, Big, Beautiful Bill Act affect the Employee Retention Credit (ERC)?
A1. The One, Big, Beautiful Bill Act (OBBBA) introduced new enforcement provisions affecting the ERC. One of these provisions, section 70605(d) of the OBBBA, 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 you otherwise met eligibility requirements. Other parts of the bill strengthen compliance enforcement by imposing penalties on certain promoters of the ERC who fail to meet due diligence requirements when assisting with certain credit claims.
Q2. Are all ERC claims for the third and fourth quarters of 2021 limited by section 70605(d) of the OBBBA?
A2. No, only new ERC claims filed after January 31, 2024, are limited by section 70605(d).
Q3. What if I filed a return claiming an ERC for the third or fourth quarter of 2021 after January 31, 2024, and I already got my refund – will I get a bill from the IRS?
A3. Generally, no. If your claim was filed after January 31, 2024, but was refunded or credited before July 4, 2025, section 70605(d) does not apply to your claim.
Q8. Are appeals rights available if an ERC claimed on a return is disallowed under section 70605(d)?
A8. Yes. If your claim is disallowed, you will receive Letter 105-C, Claim Disallowed. You may appeal to the IRS Independent Office of Appeals if you believe your refund claim reporting ERC eligibility was timely filed on or before January 31, 2024, and the IRS improperly disallowed it under section 70605(d) of the OBBBA. Additional information on how to respond to this letter if you disagree with the disallowance can be found at IRS.gov/erc105c.
