The Employee Retention Credit was one of the most significant pandemic era tax benefits available to retail employers, and it was also one of the most aggressively marketed by firms that told business owners they qualified when they did not. The IRS closed ordinary ERC processing by the end of 2025. What remains in 2026 is not a backlog it is an audit pipeline.
The IRS processed roughly 5 million ERC claims totaling approximately $235 billion. If you filed and received your payment, you are not done. The OBBBA extended the statute of limitations for ERC audits to 6 years, which means returns that included ERC claims are now open to examination through 2031 or later depending on when you filed. You need to retain every piece of documentation supporting your eligibility claim for that entire window.
Claims still pending in 2026 are in a different situation than backlog cases from 2023 or 2024. According to reporting from multiple tax practices, open cases now typically reflect heightened scrutiny rather than administrative delay. If you have a pending claim that has not moved, the most likely explanation is that it has been flagged for audit review rather than sitting in a processing queue.
The OBBBA also added a hard filing cutoff for claims covering Q3 and Q4 of 2021 that were filed after January 31, 2024. If you missed that window on those quarters, the opportunity is permanently closed regardless of eligibility.
What to Do If You Received ERC Payments
The penalty exposure for improperly claimed ERC is significant. The credit itself must be repaid with interest calculated from the original payment date. Additional penalties for negligence or substantial understatement of tax can add 20% or more on top of the principal. For credits claimed based on promoter representations that were not grounded in the actual eligibility rules, the exposure can be substantial.
If you used a promoter who guaranteed you qualified without a detailed review of your specific business operations, government orders, and revenue decline, now is the time to get an independent second opinion. The IRS is not primarily going after well documented claims filed by CPAs who did the work. They are focused on the high volume promoter filings where the eligibility analysis was cursory or fabricated.
Bottom Line: The ERC is closed, but the audit risk for claims already paid is open until at least 2031. Pull your documentation today, review it with an independent CPA, and make sure you can defend every quarter you claimed. If you used a promoter and have any doubt about the quality of the eligibility analysis, get ahead of it before the IRS does.