In March 2025, the IRS announced an important rule change for businesses that received their ERC refund in a year after the wages were originally paid.
The background
When a business claims the ERC, it is required to reduce its wage deduction on its income tax return by the amount of the credit. Normally, this meant going back and amending the income tax return for the year wages were paid — 2020 or 2021. For businesses that received their refund years later, this created a complicated and costly amendment process.
What changed
The IRS announced that businesses can now make this correction on the income tax return for the year they actually received the ERC refund — instead of amending older returns.
Who this affects
Any business that received an ERC refund in 2023, 2024, or 2025 and has not yet amended their prior-year income tax returns to reduce wage deductions.