The Employee Retention Credit helped many businesses during the pandemic. It also attracted aggressive promoters, and the IRS has spent years reviewing claims. If you've received a letter, here's how to approach it calmly.
First: don't ignore it
IRS letters come with deadlines. Missing one can limit your options. Note the date on the letter, the response deadline and the letter or notice number in the corner.
Common reasons for ERC letters
- A claim was disallowed in full or in part
- The IRS wants documentation supporting eligibility
- A refund was paid and the IRS is questioning it
- Your income tax return needs to reflect reduced wage deductions from the credit
Recent law changes
The One Big Beautiful Bill Act made changes for claims covering the third and fourth quarters of 2021, including extending the time the IRS has to review those claims and barring refunds on certain claims filed after January 31, 2024. If your claim covers those quarters, have a professional review your situation.
Gather your documentation
- The original claim (amended Forms 941-X) and how the credit was calculated
- Evidence of eligibility: government orders that affected your operations, or gross receipts comparisons
- Payroll records for the quarters claimed
- Any agreement or correspondence with the firm that prepared the claim
- Records showing PPP loan wages weren't double-counted
Be honest with yourself about eligibility
If a promoter told you "every business qualifies," it's worth a second look. Correcting a problem proactively is generally better than waiting for the IRS to find it.
Get help
ERC issues can involve payroll returns, income tax returns and penalties. We can help you review your claim, organize your records and understand your options. Formal representation before the IRS in an examination or appeal requires a CPA, enrolled agent or tax attorney, and we'll help you connect with one when your situation calls for it. Learn about our tax services.
This article is general information, current as of September 2026, and is not tax, legal or financial advice for your situation. Tax rules change often. Talk with us before acting on anything here.