Dayes Law Firm
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The filing deadline for Employee Retention Credit (ERC) claims has passed, but the IRS is actively auditing and investigating businesses that claimed the ERC, focusing on verifying eligibility and preventing fraudulent claims. They are scrutinizing claims that raise red flags, such as those with discrepancies, unusually large amounts, or inconsistencies with other tax filings.
Businesses in Phoenix (and elsewhere) could still face an ERC audit for several years to come. Our attorneys offer ongoing ERC compliance monitoring in Phoenix to ensure your business continues to meet requirements and benefits from all available tax credits.
The federal budget law enacted in 2025 made changes impacting ERC claims that Phoenix that business owners should be aware of for compliance purposes. The law retroactively bars all ERC claims filed after January 31, 2024 that are related to the third and fourth quarters of 2021. This means that if you filed an ERC claim for those specific quarters (Q3 and Q4 2021) after January 31, 2024, the claim can be disallowed, even if it was filed within the previous statutory deadlines.
However, the retroactive ban generally does not apply to claims for Q3 and Q4 2021 filed after January 31, 2024, that were already processed and paid before the enactment of the law. This creates a situation where two taxpayers with equally valid claims may face different outcomes based solely on the IRS’s processing speed. This retroactive change primarily affects claims for Q3 2021, as eligibility for Q4 2021 was mostly limited to recovery startup businesses, a narrower category of employers.
The IRS may still initiate audits or erroneous refund procedures for claims filed after January 31, 2024, even if they have already been paid. The law also extends the statute of limitations for the IRS to review and make assessments related to Q3 and Q4 2021 ERC claims to six years. This means the IRS has until April 15, 2028, or six years from the date the ERC claim was filed (whichever is later), to audit and potentially claw back refunds for these periods.
The IRS has transitioned from processing ERC claims to rigorous review and enforcement, and thousands of ERC claims are currently under audit. If you are a Phoenix business owner who has received notices from the IRS requesting additional information or proposing changes to your ERC claims, an attorney can help you understand the notices, gather the required documentation, and respond to ensure compliance.
If you have a pending claim, an attorney can advise you on whether to withdraw, modify, or gather further documentation to support it, depending on the specifics of your case. If your ERC claim is disallowed, the budget law provides for a corresponding extension to the statute of limitations for amending income tax returns to claim a wage deduction. We can help you ensure you are correctly accounting for this on your income tax returns.
If your business claimed the ERC, it is essential to remain diligent and keep thorough documentation to support your claim. If you have concerns about the legitimacy of your claim or have received communication from the IRS about it, seek guidance from our qualified tax resolution attorneys who assist clients with ongoing ERC compliance monitoring in Phoenix, and also help with claims both state and nationwide.
We stay up-to-date on the latest regulations and IRS guidance, and can ensure your business’s claims align with the most current requirements. We can help you gather and organize the necessary documentation, including payroll records, government orders impacting operations, and other relevant evidence to strengthen your defense in case of potential audits. Contact us today to request your free case consultation.
Dayes Law Firm
N/a © Dayes Law Firm. 2025 | All rights reserved.