More than five years after the Employee Retention Credit was created to help businesses keep staff on payroll during the pandemic, the IRS is still working through a backlog of claims — and law firm Jackson Walker is warning business owners that a check in hand doesn’t mean the matter is closed.
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What happened
In a July 7, 2026 client alert, Jackson Walker reviewed how the IRS has handled ERC claims one year after the One Big Beautiful Bill Act (OBBBA) reshaped enforcement rules. The firm reports that some businesses are only now receiving refund checks for claims filed years ago in 2020 through early 2024 — while others are simultaneously fighting to keep claims alive during IRS examinations or in appeals.
Businesses whose claims are denied face a strict two-year deadline to either resolve the dispute directly with the IRS or file suit in federal court, with the clock starting the moment the IRS issues its disallowance. Jackson Walker’s central warning: receiving and cashing a refund check does not mean a business is “in the clear.” The IRS retains the ability to audit a paid claim later and demand full repayment plus penalties and interest if it determines the claim was improper.
The OBBBA raised the stakes further by extending the standard three-year statute of limitations on ERC claims to six years, and by adding a 20% penalty specifically for erroneous refund or credit claims, according to the firm’s separate analysis of the law’s ERC provisions. The Taxpayer Advocate Service has also flagged this window, publishing guidance in April 2026 on a streamlined process businesses can use to formally extend or protect a claim before deadlines lapse.
Why it matters
The ERC was one of the largest and most fraud-prone COVID-era relief programs, and the IRS has spent years since sorting legitimate claims from improper ones — including claims filed by businesses that didn’t actually qualify, often at the urging of aggressive third-party “ERC mills.” With a six-year audit window now in place under OBBBA, a claim filed in, say, 2023 could still be subject to IRS scrutiny well into the 2030s. That’s a much longer tail of financial risk than most business owners are used to planning around for a single tax credit.
What this means for small business owners
If your business filed an ERC claim — whether you’re still waiting on it, just received a refund, or already cashed one — treat it as an open item, not a closed one. Jackson Walker specifically recommends talking to a tax professional before depositing any ERC refund check, since two protective options exist if there’s doubt about the claim’s validity: formally withdrawing the claim (which carries no penalty if the funds haven’t been cashed), or requesting a deadline extension via IRS Form 907 or a protective federal court filing.
For CentsIQ clients who worked with a third-party ERC specialist rather than their regular bookkeeper or CPA at the time, this is worth a second look now — have your accountant re-verify the underlying eligibility documentation (the revenue decline calculations or the government-order-suspension test) so you’re not caught by surprise years from now if the IRS opens an audit.
“Actual repayment plus penalties and interest” is what the IRS can demand if it later finds a claim improper — even after a refund check has already been issued and cashed, Jackson Walker cautions.
The bottom line
The ERC’s five-year story isn’t over. With a six-year audit window now on the books and the IRS still actively working through examinations and appeals, business owners who filed a claim should confirm its documentation is solid rather than assume a refund check is the final word.
