When business owners hear anything about the Employee Retention Tax Credit (ERTC) today, it usually brings up one question: “Where do things stand now?” And honestly, that makes complete sense because so much has changed over the last few years that it’s hard to know what still matters and what no longer applies. Some people are still waiting for updates from the Internal Revenue Service (IRS), some are unsure about old rules, and others just want clear answers without sorting through difficult wording.
So before you move further, think of this guide as a simple starting point.
What is the ERTC Tax Credit?
The Employee Retention Tax Credit, or ERTC, is basically a refundable payroll tax credit that was introduced to help businesses keep their employees during the hardest months of COVID-19. In simple terms, it gave employers a way to recover part of the money they spent on wages and health benefits at a time when things were unpredictable. And because it came as a refund, not a loan, there was nothing to repay the IRS, so they simply sent the money back after the employer filed the right payroll form.
Even though the program ended in 2021, many businesses filed amended returns afterward, and a large portion of those claims are still moving through the IRS in late 2025 because of slow reviews and ongoing checks. You can’t claim the credit anymore, but it still matters for anyone waiting for updates or responding to IRS letters.
Background of the ERTC (CARES Act and Later Expansions)
The ERTC first came out in March 2020 under the CARES Act, which was the government’s emergency plan to support employers when the pandemic suddenly disrupted normal business operations. At the beginning, the rules were fairly tight, especially since companies that took paycheck protection program (PPP) loans couldn’t claim the credit at all, which made many businesses skip it at first.
But over time, several major updates changed how the credit worked:
- The Consolidated Appropriations Act of 2021 allowed employers to claim both PPP and ERTC, as long as they didn’t use the same wages for both programs.
- The American Rescue Plan Act expanded the credit for 2021 and added a new category called “Recovery Startup Business.”
- The Infrastructure Investment and Jobs Act ended the credit early, so for most businesses, the last eligible quarter was the third quarter of 2021.
All these updates shaped who qualified, how much they could receive, and which quarters were still eligible. And because the rules kept changing, a lot of employers needed to go back through their records carefully before filing their claims.
How Does the ERTC work? (Qualified Wages, Eligible Employer Rules)
The credit is built around the idea of “qualified wages,” which simply means the wages and certain health insurance costs paid to employees during eligible quarters in 2020 and 2021. Because the rules shifted across those quarters, employers usually had to look at each period on its own to understand how the credit applied.
To qualify, an employer needed to show one of two things:
- A full or partial government-ordered shutdown.
- A significant drop in gross receipts when compared to 2019.
Qualified wages normally include:
- Regular wages.
- Employer-paid health insurance.
- Eligible tips or additional compensation.
The credit amount changed over time. In 2020, it covered 50 percent of qualified wages up to a set limit. In 2021, it increased to 70 percent per eligible quarter, which is why refunds became much larger that year. Because each quarter had its own rules and limits, businesses often reviewed them one by one. And that same quarter-by-quarter structure is also why many claims from earlier years are still in the IRS review process today.
Understanding Your ERTC Tax Credit Status
If you filed an ERTC claim, you’re mainly trying to understand where it stands right now. Many people are still waiting for updates in late 2025 because the IRS is moving slowly through older filings. When we talk about “status,” we simply mean the stage your amended return is in and what the IRS is currently doing with it.
What Does “Status” Mean—Filed, Pending, Reviewed, or Denied?
When the IRS talks about your ERTC status, it usually falls into one of these categories:
- Filed: This means your amended employment tax return (Form 941-X) has been submitted and received by the IRS. At this point, nothing has happened, yet the IRS has just accepted the document into its system.
- Pending: Your claim is in the processing queue. This stage can last months because the IRS is still dealing with a huge backlog, plus extra checks because of all the ERTC fraud issues they found nationwide.
- Under Review / In Examination: This is when the IRS is actively looking at your claim. They may be comparing it against payroll data, checking eligibility for specific quarters, or verifying that the wages weren’t used for PPP forgiveness. If they need more information, they may send a notice asking for documents. These reviews sometimes move into audit-level questions, so having someone who understands IRS tax audit defense can make the process smoother when the IRS needs deeper clarification.
- Adjusted: Sometimes, the IRS doesn’t deny the whole claim; they just reduce the amount. This usually happens when they disagree with certain wages or think some quarters weren’t eligible.
- Denied: If the IRS determines that your claim does not meet the requirements, they issue a denial notice. Many denials in late 2025 are happening because of new law changes or incomplete documentation submitted through third-party promoters. And if a denial doesn’t reflect your actual records, you still have the option to request a fresh review through IRS audit reconsideration, which allows the IRS to look at your documents again.
- Refund Issued: This is obviously the best stage; the IRS has approved everything, and your refund is on its way.
Knowing which stage you’re in helps you figure out what to expect next and whether you need to take action.
How to Check Your Status with the Internal Revenue Service (IRS)?
Since ERTC refunds don’t appear in the regular “Where’s My Refund?” tool, you have a few other ways to check where your claim stands. These are the most reliable ones:
- Call the IRS business line: You can reach the IRS at 800-829-4933. It may take time to get through, but an agent can look up your Form 941-X and tell you if it’s pending, under review, adjusted, or denied.
- Check your IRS business transcript: Your tax transcript sometimes shows updates like “Amended Return Received” or “Adjustment Made.” It’s not perfect, but it helps you see whether the IRS has reviewed your claim at all.
- Watch for IRS mail notices: The IRS still sends most ERTC updates by mail. Any request for documents, reductions, or denials will always come in a letter.
- Check with your provider if you used one: Some promoters or payroll companies offer a tracking portal, but rely on IRS updates, not their estimates. Many promoters gave timelines that didn’t match the IRS pace, which is why so many businesses are still waiting.
As the IRS backlog is still ongoing in late 2025, checking your status often requires patience, but these are the only ways to get accurate information.
Common Reasons your ERTC Claim may be Delayed or Flagged
It’s completely normal to see long delays right now. The IRS has been reviewing ERTC claims more carefully for several reasons, and honestly, even valid claims are taking longer than expected. Here are the most common reasons:
- Missing or inconsistent documentation: If the IRS can’t match your wage numbers, shutdown dates, revenue drops, or PPP allocations, the claim usually gets pulled for review.
- Possible overlap with PPP: The IRS checks whether some of the same wages were used for PPP forgiveness, which is one of the biggest reasons they pause or adjust a claim.
- High refund amounts: Large claims often get pulled automatically for verification because the IRS wants to confirm eligibility quarter by quarter.
- Errors in the amended return: Simple mistakes like wrong EIN entries, wrong quarters, or miscalculated wages can push the claim into a manual review.
- Promoter-prepared or high-risk claims: Many ERTC mills submitted claims without proper records. The IRS is flagging these at a very high rate in 2024 and 2025.
- Law changes affecting late-filed 2021 claims: Many businesses filed Q3 or Q4 2021 claims after January 31, 2024, and these are being denied because of rule changes made in 2025. These cases automatically get flagged.
- Random compliance checks: The IRS also pulls a percentage of claims for routine compliance reviews, even if nothing seems wrong.
Understanding these delays doesn’t make the wait easier, but it helps you know what’s going on behind the scenes and what you might need to prepare for next, especially if the IRS sends a follow-up letter.
ERTC Tax Credits Deadline – What You Must Know?
When we talk about the ERTC tax credit deadline, we’re simply talking about the last dates the IRS allowed businesses to file their amended payroll returns. And because these rules changed over time, it helps to look at them in a clear and straightforward way, especially if your claim is still moving through the IRS today.
Deadlines for 2020 and 2021 Claims
Originally, the deadlines were tied to the standard three-year window for amending payroll tax returns. This meant:
- 2020 ERTC claims could be filed until April 15, 2024.
- 2021 ERTC claims could be filed until April 15, 2025.
Most businesses followed these dates when filing their Form 941-X, and that’s why so many claims were still coming in well into 2024 and early 2025.
How the Deadlines Changed (and Why it Matters Now)?
In mid-2025, new legislation tightened the rules for late-filed claims, especially for 2021 quarters. The IRS began denying certain 2021 claims because they were filed after January 31, 2024, which became the cutoff for some quarters under the updated law. This mainly affected:
- Q3 2021.
- Q4 2021, including Recovery Startup claims.
So even though the original April 15, 2025, deadline was still there on paper, the IRS had the authority to reject late claims based on these newer rules. That’s why many businesses in late 2025 are now getting denial letters for 2021 claims they filed too late.
What Happens if You Miss the Deadline?
If a claim is filed after the allowed date, the IRS usually does one of two things:
- They reject the amended return, or
- They accept the filing but disallow the credit, which means the refund amount becomes zero.
There is normally no penalty for filing late, but the IRS won’t issue a refund if the deadline has passed. And once the window closes, there’s no way to reopen it unless Congress changes the law again, which hasn’t happened.
If you’re dealing with a late-filed 2021 claim or a denial related to the new 2025 rules, the IRS will explain the reason in the notice it sends. That notice becomes the main document you depend on to understand what your next steps should be.
Mistakes to Avoid and Key Risk Factors
When people look back at their ERTC filings, most of the problems they’re facing now in late 2025 come from a few common mistakes. And honestly, many of them happened because the rules kept shifting while everyone was trying to keep their businesses running. So this simple list below helps you understand the kinds of errors that usually trigger delays, adjustments, or full denials.
- Claiming the same wages for both PPP forgiveness and the ERTC.
- Filing for quarters you weren’t actually eligible for or claiming more quarters than allowed.
- Using supply chain issues as the only reason for eligibility when the situation didn’t meet IRS standards.
- Adding wages paid to family members or related individuals who don’t qualify under the rules.
- Submitting an amended return without keeping documents that match the numbers you reported.
- Listing shutdowns that weren’t tied to a clear government order.
- Relying on promoter worksheets instead of using real payroll and revenue records.
- Claiming unusually large refund amounts without strong, consistent support.
- Filing Q3 or Q4 2021 claims after January 31, 2024, which the IRS is now denied because of the 2025 law change.
- Making simple form errors like incorrect EINs, wrong quarters, or miscalculated wages.
- Working with ERTC mills or providers that the IRS has already flagged for high-risk submissions.
- Missing IRS letters or not responding by the deadline when they request more documents.
When these issues stack up, some business owners end up carrying an outstanding tax balance they didn’t expect, and that is usually where IRS tax debt settlement becomes a practical option for resolving the remaining amount.
Bringing It All Together with the Right Kind of Guidance!
When the IRS asks for records, questions part of a claim, or sends a notice that needs a careful reply, it helps to have someone who has actually handled these situations from the IRS side as well as the taxpayer side. And that’s where Mr. Michael Sullivan becomes genuinely helpful. He brings 10 years of direct IRS experience, 42 years in private practice, and a team with over 250 years of combined IRS background through attorneys, CPAs, EAs, and CTRSs.
He’s worked thousands of cases over the years, so he understands how examiners review ERTC files, what they look for in supporting documents, and how to respond in a way that moves things forward.
Schedule a consultation with Mr. Michael Sullivan today!
FAQs
You can have both a PPP loan and an ERTC claim, as long as the wages used for each program are completely separate. The IRS simply wants to see that you did not apply the same payroll costs to both benefits.
To support this, you should be able to show:
• The wages you used for PPP forgiveness.
• The wages you used for the ERTC.
• How did you keep the two sets of wages apart?
If the records clearly show that each program used different wages, then claiming both is allowed. If the wages overlap, the IRS may reduce the ERTC amount, but you can still correct the issue by providing proper payroll documentation.
If the IRS denies your claim, the first thing to do is read the denial letter carefully because it tells you the exact reason. It may point to missing documents, eligibility issues, wage errors, or a deadline that wasn’t met.
Once you know the reason, gather the records that support your claim and respond to the IRS with the information they asked for. If you still believe the claim is correct after sending your documents, you can file an appeal and have another IRS department review your case
Yes, tax-exempt organizations can claim the ERTC, and most of the rules work the same way. The only real difference is how gross receipts are measured because nonprofit revenue is tracked differently than regular business income.
A tax-exempt group could qualify if it:
• Had a full or partial suspension of operations from a government order
• Experienced a meaningful drop in gross receipts compared with 2019
Qualified wages also followed the same idea, and the organization had to support those wages with payroll records. So even though the structure of the organization is different, the credit itself worked in a very similar way.
You should hold on to your ERTC records for several years because the IRS can review these claims long after they were filed. A safe timeframe is at least four years from the date you submitted your amended return, and many professionals, including Mr. Michael Sullivan, who is an IRS tax specialist, can suggest keeping them for up to six years for extra protection.
The documents you should hold on to include:
• Payroll records for each quarter you claimed.
• Revenue comparisons to 2019.
• PPP forgiveness records if you had PPP.
• Copies of Forms 941 and 941 X.
• Government orders if you used a suspension as the basis.
• The worksheets you used to calculate qualified wages.
Having all of this stored in one place can make any future IRS request much easier to manage.
