The Employee Retention Credit

What the credit was

The Employee Retention Credit, created by the CARES Act in March 2020, "encouraged employers to keep paying employees during the COVID-19 pandemic". As first enacted, an employer qualified for 2020 if it had "a full or partial suspension of operations due to governmental orders during any quarter" or a decline in gross receipts of more than 50 percent from the same quarter of 2019 (GAO-26-107456, February 10, 2026).

Congress then made it larger. The Consolidated Appropriations Act, 2021 opened the credit to PPP borrowers whose loans were forgiven and raised the maximum from $5,000 per employee for all of 2020 to $7,000 per employee per quarter in 2021 (GAO-22-104280). The American Rescue Plan Act added "recovery startup businesses", employers that began operating after February 15, 2020 with average annual gross receipts under $1 million. The Infrastructure Investment and Jobs Act "retroactively terminated the ERC for wages paid after September 30, 2021, for employers other than recovery startup businesses" (GAO-26-107456; H.R. 3684 bill texts).

Most claims came after the fact: about 86 percent through mid-2025 were filed on amended returns, mostly Form 941-X (GAO-26-107456). The deadline for 2020 quarters was generally April 15, 2024, and for 2021 quarters April 15, 2025 (IRS questions and answers on the ERC, retrieved September 19, 2026).

The claims wave

• By September 14, 2023 the IRS had received about 3.6 million ERC claims, with more than 600,000 waiting to be processed, and warned that "a promoter can collect a contingency fee of up to 25% of the ERC refund" (IR-2023-169).
• GAO found that about 83 percent of ERC refunds, about $235 billion, went out from 2022 through June 2025, "well after unemployment had returned to its pre-pandemic level", and that a surge of promoters persuading employers to file questionable claims led the IRS to stop processing new ones (GAO-26-107456).

The moratorium, the disallowances and the disclosure programs

On September 14, 2023 the IRS stopped processing new claims "through at least the end of the year" (IR-2023-169). Commissioner Danny Werfel told the Senate Finance Committee on January 10, 2024 that the pause brought "an immediate 40% decline in average weekly claims", and that the IRS had disallowed around 21,000 pending claims from businesses that did not exist in the period claimed or paid no W-2 wages (IRS read-out).

The first Voluntary Disclosure Program asked participants to pay back "80% of the claimed ERC", with applications due by March 22, 2024 (Announcement 2024-3). It drew more than 2,600 applications disclosing $1.09 billion of credits (IR-2024-212). The second program asked for 85 percent (Announcement 2024-30) and ran through November 22, 2024 (IR-2024-212).

• On June 20, 2024 the IRS said a review of more than 1 million claims put 10 to 20 percent in the highest-risk group and found 60 to 70 percent showed "an unacceptable level of risk"; 1.4 million claims were unprocessed (IR-2024-169).
• By August 8, 2024 it had sent 28,000 disallowance letters, which it estimated would prevent up to $5 billion in improper payments (IR-2024-203).
• TIGTA reported on September 30, 2024 that 184,923 returns claiming $41.8 billion had not been considered for examination before payment, and estimated that more than $2 billion of the credit on them "may have been potentially paid in error" (TIGTA 2024-40-068).
• In January 2025 more than 1 million claims were still unprocessed (TIGTA 2025-400-025). By early April 2025 the count was over 597,000, and the IRS had sent letters partly or fully disallowing about 84,000 returns (National Taxpayer Advocate, May 8, 2025).

The 2025 end dates

The window for filing closed on April 15, 2025 (National Taxpayer Advocate). The One Big Beautiful Bill Act of July 2025 "prevents the IRS from allowing or refunding ERCs after July 4, 2025, for the third and fourth quarters of 2021 if those claims were filed after January 31, 2024" (IRS FS-2025-07). The Joint Committee on Taxation estimated that the law's ERC provisions would save $1.6 billion over fiscal years 2025 through 2028, as GAO reports it (GAO-26-107456).

There is no official improper payment rate for the credit. GAO reports that the IRS "did not complete an improper payment estimate for ERC, as required in law" (GAO-26-107456); the Treasury says it determined in August 2022 that measuring improper payments in these short-term programs "would provide minimal value", and "decided it would not report an improper payment estimate" for its COVID-19 relief programs, this one included (PaymentAccuracy.gov).

The enforcement picture, counted

Counts from the enforcement records, not findings about any case.

• IRS Criminal Investigation's count of ERC investigations grew from 252, involving over $2.8 billion of claims, on July 31, 2023 (IR-2023-169) to 588, involving more than $5.6 billion, from the start of the pandemic through September 30, 2025 (IRS-CI Annual Report, fiscal 2025). The ERC table holds the counts in between, each as worded.
• The same table lists 73 Justice Department press releases announcing a step in an ERC case: 4 in 2023, 22 in 2024, 26 in 2025 and 21 in 2026 to September 15. 26 announce guilty pleas and 24 sentencings. The largest amounts are what defendants sought from the IRS: $2.9 billion in a New Jersey complaint of March 2024, more than $600 million in an Eastern District of New York indictment of January 2025 (of which the IRS paid about $45 million), and more than $550 million in an Eastern District of California case of 2024. One Utah case of 2023 ended in acquittal.
• The sentencing table holds 14 records that name the ERC, and the DOJ press-release index 37 releases. The counts differ because the index holds only the 2,879 releases found by searching Justice Department press releases for ten phrases, and its program column names the credit in 37 of them; the 73 above were screened from all 135,405 releases in the archive's Justice Department collection.

How it shows up in this archive

As of September 23, 2026, 21 court filings from 8 cases and 12 source documents are filed under the Employee Retention Credit. They include TIGTA's ERC report collection, IRS Criminal Investigation's annual reports and the disclosure-program announcements in IRS pandemic tax enforcement, the Congressional Research Service's IF11721 and IN11819 on the early sunset, and the docket of United States v. Williams, the Credit Reset case.

ERC Mill Economy follows the promoters; The 2025 ERC Endgame follows the law that closed the late claims.

Start reading

1. GAO-26-107456 — COVID-19 Relief: IRS Can Use Lessons Learned to Address and Prevent Improper Payments (February 10, 2026)The whole program in one report: design, claims, refunds and the missing improper payment estimate.
2. IR-2023-169 — IRS orders immediate stop to new Employee Retention Credit processing (September 14, 2023)The moratorium, and the numbers behind it.
3. TIGTA Report 2024-40-068 — Erroneous ERC Claims (September 30, 2024)The claims that skipped examination.
4. Announcement 2024-3 — ERC Voluntary Disclosure ProgramThe first repayment offer, in the IRS's words.
5. Announcement 2024-30 — Second ERC Voluntary Disclosure ProgramThe second, at 85 percent.
6. GAO-22-104280 — COVID-19: IRS Implemented Tax Relief for Employers QuicklyThe early program, and how the 2021 changes enlarged it.
7. CRS Insight IN11819 — Early Sunset of the Employee Retention Credit (updated December 8, 2021)
8. IRS Criminal Investigation Annual Report, fiscal 2025The investigation count to September 30, 2025.