IRS Issues Guidance On How Controversial ERC Refunds Will Be Treated Under New Tax Law

ByKelly Phillips Erb,

Forbes Staff.

Taxpayers and tax practitioners assumed that the One Big Beautiful Bill Act (OBBBA) would address some unanswered questions related to the controversial Employee Retention Credit (ERC) program—and it did. The IRS has now issued FAQs to help taxpayers understand how the OBBBA provisions affect ERC claims and refunds.

Here’s what you need to know.

The ERC program was intended as a way to help businesses keep the lights on during the pandemic. Under the ERC program, eligible employers included those that paid qualified wages to some or all employees after March 12, 2020, and before January 1, 2022. Typically, to qualify, a business needed to demonstrate that a government order shut the business down due to the pandemic during 2020 or the first three calendar quarters of 2021, or that the business experienced a specific decline in gross receipts during the relevant periods in 2020 or the first three calendar quarters of 2021. Some businesses may also qualify as recovery startup businesses for the third or fourth quarters of 2021.