Compliance
The ERC Deadline You Might Have Missed: Navigating New Limitations Under OBBBBA
The Employee Retention Credit (ERC) claims for Q3 & Q4 of 2021 filed after January 31, 2024 are now disallowed—unless they met very narrow criteria. If you filed late, this could cost you dearly.
By NomadicTax Research Team • 6 min read • November 14, 2025
## What Just Happened: ERC Limits Tightened
- The One, Big, Beautiful Bill (OBBBBA) introduced Section 70605(d), which **prohibits the IRS from allowing or refunding Employee Retention Credits** (ERCs) for **third and fourth quarters of 2021** if the claim was filed **after January 31, 2024**, even if eligibility is otherwise satisfied. ([irs.gov](https://www.irs.gov/newsroom/irs-frequently-asked-questions-faqs-address-employee-retention-credits-under-erc-compliance-provisions-of-the-one-big-beautiful-bill?utm_source=openai))
- An important caveat: if your claim was filed (or refunded) **before** July 4, 2025 and before that deadline, Section 70605(d) **does not apply** to you. ([irs.gov](https://www.irs.gov/newsroom/irs-frequently-asked-questions-faqs-address-employee-retention-credits-under-erc-compliance-provisions-of-the-one-big-beautiful-bill?utm_source=openai))
## Who’s Affected and What Counts as “Filed”
- Late filers: anyone who submitted original or amended returns **after January 31, 2024** for Q3 or Q4 of 2021 is now effectively barred from new refunds under this provision. ([irs.gov](https://www.irs.gov/newsroom/irs-frequently-asked-questions-faqs-address-employee-retention-credits-under-erc-compliance-provisions-of-the-one-big-beautiful-bill?utm_source=openai))
- “Filed” includes returns that were properly mailed beforehand or submitted by the deadline. Postmarks and IRS receipt matter. If you filed before the deadline—even if you withdrew or changed something later—your claim may still qualify. ([irs.gov](https://www.irs.gov/newsroom/irs-frequently-asked-questions-faqs-address-employee-retention-credits-under-erc-compliance-provisions-of-the-one-big-beautiful-bill?utm_source=openai))
## Compliance Steps & Appeal Rights
- If your claim is **disallowed**, expect **Letter 105-C**. That triggers your chance to appeal via the IRS Independent Office of Appeals. Respond carefully and promptly. ([irs.gov](https://www.irs.gov/newsroom/irs-frequently-asked-questions-faqs-address-employee-retention-credits-under-erc-compliance-provisions-of-the-one-big-beautiful-bill?utm_source=openai))
- If you filed a claim after Jan 31, 2024 but got a refund/credit before July 4, 2025, the new limitation doesn’t apply. Document the dates thoroughly. Keep all correspondence and proof of filing.
## Example Scenarios
**Scenario A**: Small Business XYZ filed its amended tax return claiming ERC for Q4 2021 on February 15, 2024. Since this is after Jan 31, 2024, under Section 70605(d), XYZ cannot receive refunds for that claim, regardless of eligibility.
**Scenario B**: Company ABC filed its return claiming ERC for Q3 2021 on January 30, 2024, and a refund was processed by the IRS in June 2025. That is exempt from the limitation—Company ABC will **keep the refund**.
## Actionable Insights for Affected Taxpayers
- **Check your return dates carefully**: when was the ERC claim filed? If it’s after Jan 31, 2024 and not refunded/processed before in this window, it may be disallowed.
- **If disallowed, know your appeal path**: Watch for Letter 105-C and respond via the Appeals office. Adding a clear timeline and proof of eligibility may help.
- **Avoid penalties**: Even if disallowed, ensure all other components of the return are accurate. Errors could trigger accuracy penalties. Rely on the law rather than uncovered advice.
## Why This Change Matters Beyond Money
Apart from financial loss, this limitation reflects broader IRS efforts to curb misuse of pandemic-era tax relief. It underscores a trend: **late claims, even if legally eligible, may carry risk**. Keep strong documentation, and when in doubt, seek professional help.
**Bottom line**: If you have pending or prospective ERC claims for Q3 or Q4 of 2021 filed after January 31, 2024, you may face disallowance unless you acted earlier. Review your filings now and prepare to defend your rights if needed.