Coronavirus (COVID-19): Claim the Employee Retention Credit (ERC) Checklist
Author: Brightmine Editorial Team
When to Use
The Employee Retention Credit (ERC) was a refundable payroll tax credit designed to help eligible employers keep workers on their payrolls, increase available cash flow and provide economic stability despite the financial hardship caused by the coronavirus (COVID-19) pandemic. It first became available on March 13, 2020.
The Coronavirus Aid, Relief and Economic Security (CARES) Act, as amended by the Consolidated Appropriations Act, 2021 (CAA) and the American Rescue Plan Act (ARPA), created and modified the ERC. However, the Infrastructure Investment and Jobs Act (IIJA; P.L. 117-58) terminated the ERC for most employers on September 30, 2021, and for recovery startup businesses on December 31, 2021.
The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025 (119 P.L. 21, 2025 Enacted H.R. 1, 119 Enacted H.R. 1, 139 Stat. 72), provides that January 31, 2024, is the last day an employer must have filed Form 941-X to claim the ERC for the third and fourth quarters of 2021.
The IRS issued a fact sheet (in FAQ format) on the retroactive termination of the ERC. The fact sheet specifies that the retroactive cut-off date of January 31, 2024, prevents the IRS from allowing or refunding ERCs for the third and fourth quarters of 2021 after July 4, 2025, if those claims were newly filed after January 31, 2024.
However, the fact sheet also emphasizes that employers can keep their ERCs if they filed Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, claiming the ERC for the third or fourth quarter of 2021 after January 31, 2024, if they received their refunds before July 4, 2025. But the IRS warns that such employers may be subject to IRS compliance activities (i.e., an audit) that may result in an adjustment to their ERCs.
Finally, the fact sheet notes that the IRS will process Forms 941-X that were filed after January 31, 2024, seeking to withdraw a previously filed Form 941-X on which the ERC was claimed.
The OBBBA also modifies the statute of limitations for ERC tax assessments to six years after the latest of:
- The date on which the original Form 941-X was filed on which an employer claimed the ERC;
- The date on which the original Form 941-X is treated as filed; or
- The date on which the claim for credit or refund for the ERC is made.
The following background is helpful for an employer that comes under an ERC audit by the IRS:
- Through 2020, the ERC applied against the employer share of Social Security taxes. It was equal to 50% of the qualified wages and/or an allocable share of health plan expenses, up to $10,000 per employee per year.
- For the first three quarters of 2021, the CAA increased the ERC to 70% of qualified wages and health benefits per employee, per quarter, and the maximum wages against which the credit could be taken increased to $10,000 per employee, per quarter, for most employers.
- As of July 1, 2021, under the ARPA, the ERC applies against the employer share of Medicare taxes, with certain hard-hit employers entitled to more generous relief.
Employers that become subject to the IRS's ERC compliance activities may use this checklist to determine whether they were eligible to claim the ERC and to ensure they assembled and maintained all records required by the CARES Act. Employers should complete the following steps in sequential order.
