How The One Big Beautiful Bill Impacts ERC Claims

For years, the Employee Retention Credit (ERC) represented a critical source of relief for businesses navigating the economic disruptions of the pandemic. That landscape has fundamentally changed. With the enactment of the One Big Beautiful Bill Act (OBBBA) in July 2025, the statutory framework governing ERC claims — including those already filed, pending, or under audit — has been comprehensively rewritten.

If your business filed an ERC claim at any stage, the rules you relied upon no longer apply. As former IRS trial attorneys, we are observing a significant number of business owners acting on outdated guidance, exposing themselves to serious legal and financial liability. The following analysis explains precisely how the OBBBA affects your position and the steps you should take immediately to protect your business.

The Impact of the One Big Beautiful Bill Act (OBBBA)

The OBBBA marks a significant shift in tax enforcement, specifically targeting Employee Retention Credit (ERC) claims through Section 70605. This provision grants the IRS enhanced authority to scrutinize 2021 filings, introducing aggressive penalty frameworks and extending the window for audits and clawbacks. Rather than simply ending the program, the legislation retroactively restructures how existing claims are handled and significantly increases the risk of long-term exposure for business owners.

The following changes represent the most direct consequences of the new law:

• Retroactive Claim Restrictions: The bill officially barred any Q3 and Q4 2021 claims filed after January 31, 2024. Even if a claim was filed before previous deadlines, the OBBBA retroactively disqualified it if the IRS had not already issued payment by July 2025.
• Filing Deadlines Terminated: The legislation permanently closed the door on all new or amended ERC filings, ending the program earlier than originally anticipated.
• Expanded Audit Authority: With significant new funding, the IRS is deploying advanced risk models to automatically cross-reference payroll data and flag inconsistencies for review.
• Extended Statute of Limitations: The audit window for all 2021 ERC claims has been extended to a full six years. This allows the IRS until 2030 to issue “Erroneous Refund” notices and demand the return of funds plus interest and penalties.

Who Is Most Affected by These Changes?

While every business that filed an ERC claim is subject to the new rules, the IRS is specifically targeting three groups:

• Late Filers: If your claim was filed in late 2023 or 2024, it is under the microscope. The IRS assumes that legitimately struggling businesses filed early in the pandemic, while late filers were likely pressured by aggressive marketing campaigns.
• Businesses Using ERC Mills: If you paid a firm a percentage of your refund (a contingency fee) to file your paperwork, you are in a high-risk category. The OBBBA includes strict reporting requirements for these promoters, making it very easy for the IRS to identify and audit their client lists.
• PPP Overlap Cases: The law strictly prohibits “double-dipping.” You cannot use the exact same payroll dollars to get Paycheck Protection Program (PPP) loan forgiveness and the ERC. The government is actively matching SBA loan data against ERC filings.

What “Silent Denials” Mean for Your Claim

If you filed a claim months or even years ago and have yet to receive a check, your business may be facing a “silent denial.” Under the OBBBA, hundreds of thousands of pending claims were retroactively disqualified, leading the IRS to administratively close these files without issuing formal rejection letters. This leaves many business owners making financial projections based on funds that, legally, can no longer be paid out.

To determine your standing, have a professional review your IRS tax transcript portal. A claim that appears processed but lacks a corresponding check, or one that has remained dormant since mid-2024, has likely been caught in the OBBBA block. Identifying this status early is essential to correcting your financial records and avoiding further reliance on unavailable credits.

What You Should Do If You Filed an ERC Claim

Do not wait for an IRS notice to arrive in the mail. Take these three steps immediately to protect your business:

• Verify Your Eligibility: Have an independent tax professional (not the company that filed your claim) review your file. Did you actually suffer a significant decline in gross receipts? If you relied on a “supply chain disruption,” was there an actual government order suspending your supplier, or were things just generally delayed?
• Gather Your Documents: If an audit happens, it happens fast. Pull together your original and amended Form 941s, your payroll journals, your PPP forgiveness application, and every email or contract you signed with the company that prepared your ERC claim.
• Consider Withdrawal or Amendment: If you realize your claim was improper, the IRS still offers mechanisms to withdraw it before they begin an audit. If you withdraw, remember that you must amend your corporate tax returns to reclaim the wage deductions you were legally forced to forfeit when you first applied for the credit.

Defend Your Business Against Retroactive ERC Denials

Receiving an audit notice or a demand for repayment requires specialized legal counsel to navigate complex tax regulations. While your accountant is valuable during standard reviews, certain investigations can put them in a position where they are required to testify against you. A tax attorney can provide essential protections for your financial data and use knowledge of government procedures to anticipate the next steps in your case.

Time is a critical factor, as specific legal windows for litigation can expire quickly. If you are facing a claim denial or an active audit, professional guidance is necessary to assess your standing and protect your interests. Contact Silver Law PLC today to schedule a consultation and determine the best path forward for your business.