If someone cold-called you in 2021 or 2022, promised you a five- or six-figure refund from the IRS, and charged you a percentage of whatever came back — you need to stop reading casually and start reading carefully. The Employee Retention Credit that felt like found money may now be the most expensive phone call you ever answered.

The federal government just changed the rules. Retroactively. And if you claimed ERC for Q3 or Q4 of 2021 through one of those promoter firms, the IRS now has six years to come after you — not three. The voluntary disclosure program that let you quietly fix mistakes? Closed. The promoter who filed your paperwork? Possibly indicted, possibly dissolved, definitely not picking up the phone.

Your EIN is on that return. Not theirs. Here’s what that means right now.

The Credit That Came Looking for You

The Employee Retention Credit was a legitimate program. Congress designed it in 2020 to keep workers on payroll during COVID shutdowns. For qualifying businesses, it offered up to $26,000 per employee in refundable tax credits.

Then the promoters showed up.

Starting in late 2021 and accelerating through 2023, an entire industry of ERC “mills” blanketed small business owners with cold calls, radio ads, direct mail, and social media campaigns. Their pitch was simple: you’re owed money, we’ll get it for you, and you only pay us when you get paid.

The business model was predatory by design:

Small businesses with fewer than 50 employees — the ones without dedicated tax counsel or a CFO on staff — were the easiest targets. Women-owned businesses, which skew smaller in both headcount and revenue, were disproportionately exposed to this playbook. According to the Guidant 2025 Women in Business survey, 62% of women entrepreneurs are solopreneurs or run businesses with fewer than five employees. That profile — lean team, no in-house CPA, cash-constrained during COVID — is exactly who the promoter mills were built to reach.

The IRS has been blunt about what happened. Commissioner Danny Werfel called it “a tsunami of bad claims” pushed by unscrupulous actors who misled business owners for profit.

What the OBBBA Just Changed

The One Big, Beautiful Bill Act — signed into law in 2025 — includes Section 70605, a sweeping overhaul of ERC enforcement. If you claimed ERC, three provisions matter immediately.

1. Retroactive Disallowance of Late-Filed Claims

If you filed an ERC claim for Q3 or Q4 of 2021 after January 31, 2024, the IRS is now prohibited from paying it — even if you were otherwise eligible. The claim is dead on arrival. No appeal. No workaround. Congress killed it retroactively.

2. Six-Year Audit Window

The standard IRS assessment period for employment tax returns is three years. For ERC claims, Section 70605 doubles that to six years. The clock starts from whichever is latest:

If you filed your 941-X in mid-2023, the IRS can audit that claim through mid-2029.

3. Promoter Penalties With Teeth

The OBBBA creates a new penalty framework specifically for ERC promoters:

A “promoter” is defined as any firm that charged contingency fees and derived more than 20% of gross receipts from ERC services, or derived more than 50% of receipts from ERC work.

Here’s the part that matters most: promoter penalties are in addition to — not instead of — the business owner’s tax liability. The IRS is running two parallel enforcement tracks. Criminal prosecution of the promoter does not resolve your civil exposure. The business owner whose EIN appears on the return remains responsible for the claim, regardless of who prepared it.

The Numbers Are Staggering

This is not theoretical enforcement. It is happening at scale, right now.

Disallowance and recapture activity:

Criminal enforcement:

The backlog:

The IRS has processed nearly 5 million ERC claims total. But the enforcement machine is still ramping up. The Taxpayer Advocate Service reports that the average time from appeal request to resolution is 337 days. If you’re in the queue, you’re in for a long wait — and the interest and penalties don’t pause while you wait.

Are You at Risk? The Self-Assessment

Woman working at desk reviewing financial documents

Not every ERC claim is a problem. The credit was real, and many businesses qualified legitimately. But if any of the following apply to you, your risk level just went up significantly.

Red Flags That Your Claim May Be Vulnerable

High-Risk Claim Profiles

Your claim is at elevated risk if you:

  1. Filed for Q3 or Q4 2021 credits after January 31, 2024
  2. Claimed the credit based on “supply chain disruption” without documenting a specific government order
  3. Used a promoter that has since been indicted, dissolved, or stopped responding to communications
  4. Cannot produce documentation showing which government order affected your operations and how
  5. Received a refund that seemed disproportionately large relative to your business size

How to Check Your Filing Dates

Pull your IRS account transcripts. You need the Form 941-X filing dates for each quarter you claimed ERC. You can request transcripts at IRS.gov/transcripts or by calling the IRS Business line at 800-829-4933. The filing date — not the date you hired the promoter — determines which rules apply.

What to Do Right Now

If you’re reading this and feeling a knot in your stomach, good. That means you’re taking it seriously. Here’s your action plan.

Step 1: Pull Your 941-X Records

Request your employment tax transcripts from the IRS for every quarter you claimed ERC (typically Q1 2020 through Q4 2021). Confirm:

Step 2: Identify Your Exposure Window

Map your filing dates against the new rules:

Step 3: Get an Independent Eligibility Review

Hire a CPA or tax attorney — not the firm that filed your original claim — to review your ERC eligibility. This is not optional. You need someone with no financial stake in the outcome to tell you honestly whether your claim holds up. If your financial statements aren’t organized enough for this review, that’s your first problem to solve.

Step 4: Consult a Tax Attorney

If your independent review reveals problems, you need legal counsel — not just accounting advice. A tax attorney can:

Step 5: Understand Form 907

If you’ve already received a disallowance notice, you have a two-year statute of limitations from the notice date to file suit, reach a settlement, or execute an extension. The IRS sends Notice CP320B to taxpayers with six months or less remaining. Form 907 — an Agreement to Extend the Time to Bring Suit — buys you more time, but both you and the IRS must sign it before the two-year window closes.

Do not assume the IRS will remind you. The Taxpayer Advocate Service specifically warns that taxpayers should independently track this deadline because it does not appear on notices or transcripts.

Step 6: Build Your Cash Buffer Now

If there’s any chance you’ll owe money back to the IRS — refund plus interest plus penalties — you need to start building your cash buffer today. Don’t wait for the audit notice. The IRS charges interest from the date the credit was paid, not from the date they send you a bill.

The Promoter Is Not Your Shield

This is the hardest section to write, because the emotional logic runs the opposite direction. They called me. They told me I qualified. They filed the paperwork. They took 25% of my refund. How is this my problem?

It’s your problem because the tax code doesn’t care who filled out the form. It cares whose EIN is on it.

Your Name, Your Liability

When the IRS sends a disallowance or recapture letter, it goes to the business — not the promoter. When penalties and interest accrue, they accrue against the business. When the IRS places a lien, it attaches to the business’s assets.

A promoter’s criminal indictment does not:

Some Promoters Have Disappeared

The ERC promoter industry was largely unregulated. Many firms were created specifically to capture ERC fees and have since dissolved, moved, or stopped responding to clients. If your promoter is gone, you’ve lost your most important witness — and potentially your only source of documentation about why the claim was filed the way it was.

Building a Reasonable Cause Defense

If you’re audited, your best defense is demonstrating that you acted in good faith and exercised ordinary business care. That means documenting:

The absence of documentation is itself a red flag to the IRS. If you can’t produce the records that support your claim, the claim looks manufactured — because in many promoter-driven cases, it was.

What About Suing the Promoter?

You may have a civil claim against your promoter for professional malpractice, fraud, or breach of fiduciary duty. But civil litigation is expensive, slow, and uncertain — especially if the promoter has dissolved or is in criminal proceedings. It’s a path worth exploring with an attorney, but it does not solve your IRS problem. The IRS doesn’t wait for you to sue someone else.

The Clock Is Running

Here’s the reality check. The Voluntary Disclosure Program that let businesses quietly return improper ERC claims at a discount closed in November 2024. That exit ramp is gone.

The OBBBA gave the IRS a six-year audit window, new penalty authority, and a mandate to recover billions in improper credits. The enforcement infrastructure is built. The disallowance letters are going out at scale. The criminal cases are producing prison sentences measured in years, not months.

If you used a promoter, if you can’t clearly articulate which government order affected your business and how, if you paid a contingency fee to someone who cold-called you — your claim is in the risk zone.

This doesn’t mean you’ll be audited. It means you need to be ready if you are. And “ready” means having your records organized, your eligibility independently verified, your emergency capital plan in place, and a tax attorney’s number in your phone.

The worst thing you can do is nothing. The second worst thing is panic. The right thing is to treat this like what it is: a business risk that requires a business response.

Pull the records. Get the review. Know where you stand. Because six years is a long time to wonder whether the phone is going to ring.

This article is for informational purposes only and does not constitute tax or legal advice. Consult a qualified tax attorney or CPA for guidance specific to your situation.