IRS Updates ERC FAQs
The IRS recently updated its FAQs related to the Employee Retention Credit (ERC). As we had previously communicated, taxpayers were required to reduce the wage expense on the income tax return for the year in which wages used to compute the ERC were paid or incurred. As a practical matter, some taxpayers were waiting to reduce the wage expense until they received their ERC refunds.
Didn’t Reduce The Wage Expense?
For taxpayers who did not reduce the wage expense in the year in which the wages were paid or incurred and have received the ERC refund, the IRS will allow taxpayers to include the amount received as income in the year in which the ERC refund is paid. This eliminates the need to file an amended return for past years where the statute of limitations may have closed.
Was Your ERC Refund Claim Disallowed?
For taxpayers whose ERC refund claim is disallowed and the taxpayer had reduced wages on the income tax return in which the wages were paid or incurred, the IRS will allow the taxpayer the opportunity to claim a deduction in the year in which the taxpayer has exhausted all remedies to seek the ERC refund. This eliminates the need to file an amended return, AAR, or protective refund claims.
Got More Questions?
These updates from the IRS are welcome simplification for taxpayers to deal with the long delay in the IRS processing the ERC refund claims.
If you have questions or concerns, reach out to Sara Goldhardt or Kevin Dunn.
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