IRS Unexpectedly Releases Guidance on ERC Limitations Under OBBA

Apparently not every IRS employee is on involuntary sabbatical. Yesterday the IRS issued Fact Sheet 2025-07 setting forth FAQs on the Employee Retention Credit (ERC) limitations enacted under the One Big Beautiful Bill (OBBA).

For those of you needing a primer, OBBA introduced new ERC enforcement provisions including section 70605(d), which 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. This prohibition applies even if the taxpayers otherwise meet 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.

The FAQs address a number of important questions, some of the more noteworthy being:

• 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?

  • The IRS answers no, subject to other IRS compliance activities.

• What if I claimed an ERC for the third or fourth quarter of 2021 on or before January 31, 2024, and then filed an amended return withdrawing the claimed ERC after January 31, 2024, for the same period?

  • The IRS answers Section 70605(d) does not apply and the amended return will be processed.

• Are appeals rights available if an ERC claimed on a return is disallowed under section 70605(d)?

  • The IRS answers yes.

For the complete set of FAQs, click HERE.

If you or your client have any questions about ERC or other tax-related topic, feel free to contact me at (214) 749-2464 or adaddino@meadowscollier.com.