The Employee Retention Credit in 2026: What Is Still Open and What Is Closed

The Employee Retention Credit (ERC, also called the ERTC or employee retention tax credit) was a refundable payroll tax credit created by the CARES Act in March 2020. The Relief Act extended it into 2021, the American Rescue Plan Act (ARPA) extended it again, and the Infrastructure Investment and Jobs Act ended it early, on September 30, 2021, for everyone except recovery startup businesses. It was a tax credit, not a grant, loan or payroll tax rebate, and the IRS says the only way to claim it was on a federal employment tax return.

In 2026 the general deadlines to file have passed, but claims filed before them are still moving through IRS review, and a 2025 law changed the rules for late-2021 claims. This page lays out what is closed, what is still open, and the options the IRS still offers for a claim you are unsure about. BEG does not prepare, review or file ERC claims.

What the ERC covered

The credit applied to qualified wages paid after March 12, 2020 and before January 1, 2022, with different rates and caps by period, per the IRS comparison chart:

An employer qualified for a quarter in one of three ways: a COVID-19 government order fully or partially suspended its operations; its gross receipts fell far enough below the same quarter of 2019 (below 50% to start in 2020, below 80% in 2021); or, for the third and fourth quarters of 2021 only, it was a recovery startup business that began after February 15, 2020 with average annual gross receipts of $1 million or less. Wages used for Paycheck Protection Program forgiveness and wages paid to related individuals never counted.

The COVID paid sick and family leave credits ran on a similar track: leave taken from April 1, 2020 through March 31, 2021 under the Families First Coronavirus Response Act and its extension, then April 1 through September 30, 2021 under sections 3131 to 3133 added by ARPA, per the IRS overview. Those credits are closed as well.

The deadlines that have passed

• April 15, 2024: the IRS deadline to claim the ERC for 2020 tax periods, per the IRS ERC FAQs.
• April 15, 2025: the IRS deadline for 2021 tax periods.
• January 31, 2024: for the third and fourth quarters of 2021, a claim filed after this date cannot be allowed or refunded after July 4, 2025, under P.L. 119-21.
• No 2022 credit: no ERC applies to wages paid after 2021, per IRC 3134(n).

The IRS gives the first two dates as general deadlines. They follow from the refund rules: a claim is due 3 years after the return was filed (or 2 years after the tax was paid, if later), and a quarterly return filed before April 15 of the next year counts as filed on April 15, under IRC 6513(c). A quarterly return filed late starts a later clock from its filing date. Because the only way to claim the ERC was an original or adjusted employment tax return, such as Form 941-X, a pitch to file a new ERC claim in 2026 deserves caution: for employers that filed on time the deadlines have passed, and for the third and fourth quarters of 2021 the law bars new claims outright.

What P.L. 119-21 changed

Section 70605 of Public Law 119-21, signed July 4, 2025, added four enforcement provisions. The IRS refers to the law as the One, Big, Beautiful Bill and, more recently, the Working Families Tax Cuts.

The IRS explains the cutoff in FS-2025-07: only claims filed after January 31, 2024 are limited; a claim counts as filed by that date if it was postmarked or submitted to the right IRS office by then; a claim filed later but refunded or credited before July 4, 2025 is generally not affected; and a disallowance under the cutoff can be appealed.

A COVID-ERTC promoter, under the law, is someone who helps with ERC documents and either charges a fee based on the refund while ERC work makes up more than 20% of its gross receipts, or has ERC work above 50% of gross receipts, or above 20% and above $500,000. The 20% erroneous claim penalty change sits in IRC 6676.

Where IRS processing stands

The IRS ERC page reports that, as of the week ending August 29, 2026, about 14,900 ERC claims remained in process:

• 1,650 under review
• 2,950 pending payment or disallowance
• 3,600 under audit
• 5,300 awaiting review of the taxpayer's response to a disallowance
• 1,400 with the IRS Independent Office of Appeals

The IRS says it updates these figures monthly. Taxpayers whose claims were disallowed and who are waiting on the IRS to review their response face a two-year clock to file suit, which an appeal does not stop. On April 27, 2026 the IRS announced in IR-2026-58 a faster way to extend it: taxpayers with six months or less left who are still waiting on that review can submit Form 907 through the IRS Document Upload Tool, selecting notice CP320B.

What to do with a pending or questionable claim

Withdrawal has conditions, per the IRS withdrawal page: the claim must have been made on an adjusted return filed only to claim the ERC, and you must withdraw all of it. It is not available for a credit claimed on an original Form 941, a partial reduction, a cashed refund, or a claim the IRS has already fully disallowed. The IRS confirms a withdrawal by letter, and it is not effective until you receive that acceptance. The IRS also notes that withdrawing a willfully fraudulent claim does not protect against criminal investigation. The second voluntary disclosure program, which let businesses repay 85% of a 2021 credit, closed November 22, 2024.

Letter 105-C. The IRS uses Letter 105-C to disallow a claim. If you disagree, the IRS asks for a response, generally within 30 days, with an explanation and records for each quarter: the government orders and how they suspended operations, or gross receipts for the claim year and 2019, or proof of recovery startup status, plus your worksheets. You can request the Independent Office of Appeals at any point in the two years after the letter, or file suit in U.S. District Court or the Court of Federal Claims.

The income tax side. The ERC reduces the wage deduction for the year the wages were paid. Questions the IRS added to its FAQs on March 20, 2025 give two shortcuts. If the credit was paid in a later year and you never reduced the deduction, include that amount in income for the year you received the ERC instead of amending. If a claim is disallowed after you reduced the deduction, deduct those wages in the year the disallowance becomes final.

How to spot an ERC promoter

The IRS lists these warning signs of aggressive ERC marketing:

• Unsolicited calls, texts, emails or ads about an “easy application process.”
• An offer to check your eligibility “in minutes.”
• Large upfront fees, or a fee based on a percentage of the refund.
• Pressure to take a refund anticipation loan.
• A preparer who will not sign the return being filed, leaving all the risk with the business.
• Claims that every business qualifies, or that you have “nothing to lose.”
• A generic narrative about a government order instead of a copy of the order that applied to you.
• Mail that looks official from a made-up agency, such as a “Department of Employee Retention Credit.”

For aid or advice given after July 4, 2025, a promoter that fails the new due diligence rules owes $1,000 per failure. To report one, the IRS asks for Form 14242, Report Suspected Abusive Tax Promotions or Preparers, sent to its Lead Development Center with any supporting materials, as described in the scams section of the ERC FAQs.

Records to keep while a claim can be examined

With a six-year assessment window on late-2021 credits, keep these for every quarter you claimed:

• Each government order you relied on, and how and when it suspended your operations.
• Quarterly gross receipts for the claim year and the comparison year (generally 2019), and how you applied the aggregation rules.
• Which employees received qualified wages, and how much, with related individuals excluded.
• How Paycheck Protection Program forgiveness and ERC wages were kept separate.
• Allocations of qualified health plan expenses.
• Every Form 941-X (or 943-X, 944-X, CT-1X) filed, any Forms 7200, and proof of the filing date.
• Income tax returns showing how the wage deduction was reduced, and every IRS letter you received.

Credits that are open today

New ERC claims are off the table for employers that filed on time, but payroll-based credits have not gone away. The 2026 guide to payroll tax credits covers the ones employers can claim now, from the FICA tip credit to the paid leave and retirement plan credits. For a company with research wages, the one that reduces payroll tax directly is the R&D payroll election: a startup under $5 million in gross receipts can apply up to $500,000 a year of research credit against the employer share of Social Security and Medicare tax, on line 11 of the 2026 Form 941. It is part of the federal research credit in IRC 41, not a pandemic program.

Established, profitable companies can still claim missed research credits in open prior years; that is the Credit Recovery work on the Tax Planning page.

Sources: IRS, Employee Retention Credit; IRS, Frequently asked questions about the Employee Retention Credit; IRS, Employee Retention Credit 2020 vs 2021 comparison chart; IRS, Withdraw an Employee Retention Credit (ERC) claim; IRS, Understanding Letter 105-C, Disallowance of the Employee Retention Credit; IRS, FS-2025-07, ERC compliance provisions FAQs; IRS, IR-2026-58 (April 27, 2026); IRS, Employee Retention Credit Voluntary Disclosure Program; IRS, Tax credits for paid leave under the American Rescue Plan Act of 2021; Public Law 119-21, section 70605 (July 4, 2025); 26 U.S.C. 3134; 26 U.S.C. 6676; 26 U.S.C. 3131; 26 U.S.C. 6513; IRS, Form 941 for 2026 (Rev. March 2026). Dates, figures and rules checked against these sources on September 25, 2026. This is general information, not tax advice for your situation. Tax services are provided by licensed tax professionals under a separate engagement agreement. BEG does not provide tax advice.