The IRS has made it clear: the sun is setting on the Employee Retention Credit, and businesses that claimed it—or plan to amend past filings—need to tread carefully. The Employee Retention Credit 2025 update signals a shift in focus: with the filing window closed and a surge in enforcement activity, 2025 is shaping up to be the year of audits, repayment demands, and compliance pressure.
Here’s what employers should be watching now to avoid headaches or worse later.
The Deadline Has Passed, But the Scrutiny Is Just Beginning
Although the program itself has ended, the IRS has shifted its focus from processing claims to reviewing them. If you submitted an Employee Retention Credit claim in previous years, you could be selected for audit or further review in 2025. In fact, the agency has hired additional enforcement personnel and launched an ERC Voluntary Disclosure Program to encourage businesses to come forward if they filed in error.
Some business owners, misled by aggressive third-party marketers, submitted claims without understanding the full qualifications. That’s why the Employee Retention Credit 2025 Update is so critical: it’s not about what’s still available, but what’s at stake for businesses that already filed.
Use Caution with Amended Returns and Late Claims
In September 2023, the IRS placed a moratorium on new Employee Retention Credit claims due to widespread fraud concerns. That pause was extended, and no new claims are being accepted at this time. If your business missed the opportunity, it’s likely best to move forward, not backward—especially in light of the Employee Retention Credit 2025 update, which confirms that new filings remain off the table.
For those who filed just before the freeze, your claim may still be in limbo. The IRS has warned of processing delays lasting months or longer. Keep records of all supporting documentation, including payroll data and any guidance you relied on when filing.
Employee Retention Credit 2025 Update: Focus on Documentation
The IRS has been clear that documentation will be key during this next phase. That includes everything from proof of revenue declines to records of government shutdown orders that impacted operations. Without proper backup, even a legitimate claim could be denied or trigger penalties.
To reduce risk, consult a qualified tax advisor (NOT a third-party ERC promoter) who can walk you through your original claim and flag any issues. If corrections or disclosures are needed, it’s better to address them proactively than to be caught off guard by an audit letter.
The Bottom Line for Business Owners
The Employee Retention Credit offered welcome relief during the pandemic, but it’s now a regulatory minefield. The focus in 2025 has shifted to compliance and enforcement. Business owners should:
- Avoid engaging with companies still pushing Employee Retention Credit “refund recovery” services
- Review past claims with a CPA or tax professional
- Consider voluntary disclosure if they suspect errors
- Stay current with IRS updates and changes in audit activity
The Employee Retention Credit 2025 update isn’t just a reminder of the program’s past; it’s a wake-up call about the consequences that could unfold this year. Contact MeredithCPAs today for a claim review, guidance on audit preparation, or help correcting a past filing.