The Federal Government’s New Budget Bill and Its Effect on the ERC Tax Credit

The federal government’s 2025 budget law has been making headlines across the nation. If you are concerned about how this legislation affects the Employee Retention Credit (ERC), you are not alone.

The so-called “One Big Beautiful Bill” rewrites many areas of the law, and it can be confusing to sort it all out. Take a minute to read up on its effect on the ERC tax credit and schedule a consultation with our team if you need assistance with what to do next.

What Is the ERC?

The ERC is a refundable payroll tax credit that was established through the CARES Act, and subsequent legislation, during the onset of the COVID-19 pandemic, with the goal to encourage certain qualifying businesses to keep workers on their payroll during pandemic shutdowns. The credit amount depended on the size of the company, but typically it could be as much as $7,000 per employee, per qualifying quarter. It thereby reduced the company’s mandatory employment tax deposits for wages paid between March 12, 2020 and December 31, 2021.

How Does the Federal Budget Law Affect the ERC Tax Credit?

The federal government’s new budget law significantly affects the ERC tax credit. It prohibits ERC refunds for 2021’s third and fourth quarters when filed after January 31, 2024. In addition, the law extends the IRS’s statute of limitations on audits and assessments to six years.

The law also introduces strict regulations and penalties for servicers that assist with ERC claims, while extending the time taxpayers are permitted to amend their income tax returns for third and fourth quarter 2021. If a company has already filed and still plans to take advantage of this credit, it can expect longer processing times, as well as the increased risk of an audit.

Reach Out to a Knowledgeable Attorney with Questions About How the Budget Bill Affects the ERC Tax Credit

The federal government’s new law and its effect on the ERC tax credit is a complex subject that not everyone understands. The skilled legal team at our law firm can answer any questions you may have about the tax credit, the eligibility window, and potential for an audit. It may have restricted your ability to get the tax credits you deserve but we can still provide legal insight for businesses across Arizona. Call us now to learn more.