Compliance
What Employers & Taxpayers Must Know about OBBB’s FAQs on the Employee Retention Credit
The One, Big, Beautiful Bill Act introduced limits on Employee Retention Credit claims for quarters in 2021; recent FAQs clarify timing, appeal rights, and documentation obligations to avoid claim disallowance.
By NomadicTax Research Team • 5-8 min read • November 17, 2025
## Background: What Changed for the Employee Retention Credit (ERC)
- In 2021, many employers claimed the **Employee Retention Credit (ERC)**, a refundable credit aimed at retaining employees during pandemic-related disruptions. Some claims for Q3 & Q4 of 2021 were filed *after* the January 31, 2024 deadline.
- The **One, Big, Beautiful Bill** (enacted July 4, 2025) instituted **limits** on these late-filed credits and refunds. ([irs.gov](https://www.irs.gov/newsroom/news-releases-for-october-2025?utm_source=openai))
## Recent IRS FAQs (Fact Sheet 2025-07) Explained
- The FAQs provide guidance on when a claim is considered **timely filed**. If a return or amended return (or Form 941-X) for Q3 or Q4 2021 was filed after Jan 31, 2024, it may face disallowance. ([irs.gov](https://www.irs.gov/newsroom/irs-issues-faqs-to-address-employee-retention-credits-under-erc-compliance-provisions-of-the-one-big-beautiful-bill?utm_source=openai))
- Clarifies what “limitation on credits and refunds” means—i.e. thresholds, calculation methods, and recapture in certain cases.
- Outlines taxpayer rights to **appeal** if a credit claimed is disallowed under the new rules—what documentation is needed, deadlines and the process.
## What Employers Should Do Now
1. **Review your ERC claims** from Q3 & Q4 2021—verify date filed, amended or original, and ensure they met the Jan 31, 2024 deadline.
2. **Collect supporting documentation**—eligibility of wages paid, interactions with PPP, proof of suspension or decline in gross receipts.
3. **If refunded or credited amounts are in question, consider engaging a tax professional** to evaluate whether appeals are viable under IRS process.
## Example Scenario
- **Company X** submitted its ERC claim for Q4 2021 via an amended Form 941 on Feb 15, 2024, after the Jan 31 deadline. Under OBBB’s limitation, this claim may now be disallowed or subject to adjustment. The FAQs define that such late claims are subject to limitation.
- **Company Y** filed before the deadline and has full documentation; its refund is more likely to survive IRS scrutiny.
## Compliance Tips & Risk Management
- Keep copies of all filed returns, amendments, and correspondence with IRS.
- When making ERC claims—it’s not enough to have the documentation; you must show timely filing.
- Factor in potential IRS audits or adjustments when doing your financial planning and projections.
## Bottom Line
New limitations on late ERC claims under the One, Big, Beautiful Bill mean employers need to act fast. If you claimed ERC for late-filed Q3/Q4 2021 periods, verify filing dates and documentation. The recently issued FAQs give you a roadmap to compliance—and grounds for appeal if needed.