ERC Refund 2025: What’s New and What Businesses Must Know

Employee Retention Credit (ERC), a thing from a few years back, is still a hot topic. Countless businesses have filed ERC claims, which are still unresolved, and the IRS has decided to intensify its investigation. At this moment, the IRS is checking not only those ERC refunds that have not yet been processed, but also the ones that have been paid. Here are some important things that will help you be up to date and prepared in 2025. 

Overview of ERC Refund 

At the time of the first lockdown, most of the major businesses were hit hard like never before. They had to do things in a whole new way that they had never done before to keep their employees safe and run their operations. The Employee Retention Credit (ERC) has been like a life belt for those who are in deep water because of this unprecedented crisis. 

The path to the money has again become obstructed. The IRS announced a suspension of ERC claim processing, and at the same time, refund payments are being delayed. The funds that were necessary for the business plan implementation have still not reached the businesses. Thus, many companies still find themselves in the same position. As a result, they figure out where their money from the ERC refund update is.

The delay in compensation is a further burden on the already complicated situation. Businesses that survived the pandemic now have to go through unnecessary processes if they want to get the relief that they urgently need. 

Latest IRS Developments with the ERC

Read the following ERC refund update for 2025.  

Unpaid ERC Claims

IRS agents are meticulously going over every ERC application to make sure it is authentic. They intend to find out whether the businesses used the ERC refund processing time 2025, according to its provisions, and whether the amounts declared correspond to the given criteria. To companies and tax professionals, this is a call to be as attentive to every detail as possible. At present, the IRS has issued promoters about 100,000 letters specifying that the ERC claims are partially or fully disallowed. 

For taxpayers, two years are allowed within which they can submit their responses, but only about 2000 taxpayers have so far notified the IRS of their responses. From this, it can be concluded that taxpayers are either late in responding or have accepted the IRS's position. We can expect more IRS disallowance letters for the ERC refund in 2025.

Paid ERC Claims

The IRS plans to review unpaid claims but also intends to recapture improper ERC claims already paid. The statute of limitations for 2021 ERC claims on Forms 941-X ends on April 15, 2025, unless extended. Audits of these claims may begin before this date. If a disallowance letter is sent before the statute expires, it extends the statute by two years. Proposed regulations issued in July 2024 enable the IRS to recapture payroll-related refund claims with interest.

Tax Controversy

Throughout 2024, taxpayers and their advisors have pursued legal action to compel the IRS to address delayed ERC claims. While these efforts have yet to succeed, several cases are still in progress.

In a recent taxpayer issue, the IRS unexpectedly acknowledged that the primary guidance in IRS Notice 2021-20 functions merely as interpretive rules. The IRS regarded certain eligibility criteria outlined in Notice 2021-20 as safe harbors, which leaves taxpayers and their advisors to assess the relevant facts and circumstances to establish eligibility. Consequently, some taxpayers who can substantiate the fundamental eligibility criteria for the ERC might qualify for the credit, irrespective of the effects of a government order.

How to Check ERC Refund Status Online?

After submitting your claim, your next query will likely be, “Where is my ERTC check?” Initially, in order to follow your ERC refund, confirm that it has been sent to the IRS. The IRS does not allow electronically submitting Form 941X (the amended payroll tax return). Therefore, you have to deliver this form by mail to the service center of the IRS that is nearest to you. 

It is advisable to use USPS-certified mail with a return receipt when sending amended returns. Many people think that a package is delivered automatically. But actually, a status check of the shipment online and confirmation that it is with the IRS is necessary.

Next, you need to ensure that the IRS has your return and that it has been registered on their system. To confirm this, call the IRS business helpline at (800) 829-4933. When you call the IRS for your return’s status, have your federal employee identification number (EIN) and the tax return information ready. 

However, you have to be mindful that the agent shortage may cause a delay in answering your calls, and you, therefore, may have to wait for a long time. Also, it is not certain that an IRS representative will provide you with every piece of information about your refund status that you want to get. 

Speaking to an agent will not speed up your IRS ERC refund process either. The IRS is currently handling a large number of unprocessed payroll tax returns, which has impacted the ERC refund processing time 2025.

Conclusion

If you want to know how to check ERC refund status online, read the entire guide. As we already mentioned, the Employee Retention Tax Credit (ERTC), which is also known as the Employee Retention Credit (ERC). It is a quarterly tax incentive that is offered to employers who are affected by the economic disruptions caused by the COVID-19 pandemic. In 2020, a 50% credit is given on eligible wages up to $10,000. 

This percentage increased to 70% in 2021, while still maintaining a maximum wage limit of $10,000. To be eligible for the ERC, an employer must have experienced full or partial disruptions to their business due to the pandemic and must show at least a 50% reduction in gross receipts when compared to corresponding quarters.

Frequently Asked Questions 

Check out the following additional questions that will clear all your doubts on ERC refunds. 

Q. What is an ERC refund?

Ans. The Employee Retention Credit, also known as the Employee Retention Tax Credit, is a refundable tax credit for specific eligible tax-exempt businesses and organizations that owned employees and were impacted by the COVID-19 pandemic. 

Q. How long are ERC refunds taking now?

Ans. The refunds of the ERC could take until the end of the calendar year to finish processing. 

Q. Who is eligible for the ERC tax credit?

Ans. To become eligible for the ERC tax credit, you should be: 

• Contingent upon a valid governmental directive concerning COVID-19 that resulted in a complete or partial halt of your business activities.

Q. What is the interest rate on ERC refunds?

Ans. 15-16% is the interest rate on ERC (Employee Retention Credit) refunds. 

Q. How did anyone receive their ERC credit?

Ans. Employers who qualify but didn't claim the credit when they first filed their employment tax return can still claim it by filing an amended return.