The Employee Retention Credit (ERC) is a valuable payroll tax credit that was introduced under the CARES Act to help businesses retain employees during the COVID-19 pandemic. While the program has officially ended, many eligible businesses can still retroactively claim the ERC for 2020 and 2021. If you missed this opportunity, it’s not too late — but you must act soon.
In this guide, we’ll explain how to claim the ERC, who is eligible, required documentation, common mistakes to avoid, and how long it takes to get your refund.
🔍 What Is the Employee Retention Credit (ERC)?
The ERC is a refundable tax credit for businesses and tax-exempt organizations that paid wages to employees during COVID-19-related disruptions. It’s designed to encourage employers to keep employees on payroll even during revenue losses.
💰 Key ERC Benefits:
| Year | Max Credit per Employee | Eligibility Requirement |
|---|---|---|
| 2020 | $5,000 total | 50% revenue drop or shutdown |
| 2021 (Q1–Q3) | $7,000 per quarter | 20% revenue drop or shutdown |
✅ Who Can Still Claim ERC in 2025?
Even though the ERC program has ended, you can still file an amended payroll tax return (Form 941-X) to claim your ERC refund.
✅ You may qualify if:
- You experienced a government-mandated shutdown, partial closure, or supply chain disruptions.
- You saw a significant decline in gross receipts (50% in 2020 or 20% in 2021).
- You retained employees on your payroll during these periods.
📅 Deadline to Claim ERC:
- April 15, 2024 – Last day to claim ERC for Q2, Q3, Q4 of 2020.
- April 15, 2025 – Last day to claim ERC for all quarters in 2021.
📝 Step-by-Step: How to Claim the ERC
1. Determine Eligibility
Use IRS guidance or consult with a tax professional to confirm:
- Revenue reduction eligibility
- Government order impact
- Aggregation rules for related entities
- Full-time employee headcount
🛑 Tip: If you received a PPP loan, you can still qualify, but not for the same wages used for loan forgiveness.
2. Calculate the ERC Amount
You’ll need:
- Qualified wages paid to each employee
- Health insurance expenses included
- Number of eligible quarters
Use IRS worksheets or an ERC calculator to estimate your potential refund.
3. Gather Documentation
Accurate records are essential. Collect:
- Payroll reports
- PPP loan documents (if applicable)
- Revenue comparisons by quarter (2019, 2020, 2021)
- Government shutdown orders (if applicable)
- Timesheets or HR records
4. File IRS Form 941-X
You must file Form 941-X (Adjusted Employer’s Quarterly Federal Tax Return) to retroactively claim the ERC.
Form 941-X Filing Basics:
| Section | What to Include |
|---|---|
| Part 1 | Basic business info and original filing details |
| Line 18a–26a | Adjustments for qualified wages and health plan expenses |
| Explanation Section | State why you’re amending the return (ERC claim) |
📌 File a separate Form 941-X for each quarter you’re claiming.
5. Submit the Form to the IRS
Mail the completed 941-X form to the appropriate IRS address based on your business location. The IRS does not accept this form electronically.
✅ Pro tip: Keep a copy of all submitted forms and tracking information.
🕐 How Long Does It Take to Get ERC Refund?
The IRS is experiencing delays due to a high volume of amended returns and increased fraud checks.
📦 Current refund timeline (as of 2025):
- 6 to 12 months on average
- Some claims may take longer due to ERC audits or IRS backlog
⚠️ Common ERC Mistakes to Avoid
| Mistake | Why It’s a Problem |
|---|---|
| Double-dipping with PPP funds | ERC and PPP can’t apply to same wages |
| Using ineligible wages | Contractors or owners’ wages don’t count |
| Lack of documentation | May trigger audit or claim denial |
| Claiming for closed businesses | Business must have been operational |
🛡️ Is It Safe to Use an ERC Consultant?
Many third-party “ERC mills” are under IRS scrutiny for submitting false or inflated claims. While legit tax professionals or CPAs can help, avoid firms that:
- Charge high upfront fees
- Promise “guaranteed” ERC approvals
- Take a percentage of your refund
🛑 Important: You are liable for any incorrect claim — not the consultant.
💼 Can I File ERC on My Own?
Yes, if you’re confident with tax filings and IRS forms. However, for most businesses, it’s wise to work with:
- A certified public accountant (CPA)
- A payroll specialist
- A reputable tax attorney
Make sure the professional is ERC-knowledgeable and IRS-compliant.
🏁 Final Thoughts: Don’t Miss the ERC Deadline
The Employee Retention Credit can result in tens or even hundreds of thousands of dollars in tax refunds for eligible businesses. With the deadline for 2021 claims approaching in April 2025, now is the time to gather your paperwork and file.
📌 Summary Table: ERC Claim Process
| Step | Action | Deadline |
|---|---|---|
| 1 | Check eligibility | ASAP |
| 2 | Calculate credit | ASAP |
| 3 | Gather documentation | ASAP |
| 4 | File Form 941-X | By April 15, 2025 |
| 5 | Wait for refund | 6–12 months |