Introduction
The Employee Retention Credit (ERC) was a lifeline for many small businesses during the COVID-19 pandemic. However, in 2025, the IRS has doubled down on enforcement actions, targeting fraudulent or incorrect ERC claims. If your business claimed ERC or is considering doing so retroactively, understanding the legal implications is critical.
What is the ERC?
The Employee Retention Credit is a refundable payroll tax credit offered to eligible employers who retained employees during government-ordered shutdowns or saw significant declines in revenue during 2020 and 2021.
2025 IRS Enforcement Update
- In March 2025, the IRS announced over $2 billion in recaptured funds due to fraudulent ERC claims.
- Businesses that worked with third-party promoters or “ERC mills” are under scrutiny.
- The IRS has introduced Form 15434, a voluntary disclosure option for businesses that wish to rectify improper claims.
What You Should Do Now
- Review your ERC documentation – Ensure eligibility and calculate the credit based on accurate payroll data.
- Amend returns if necessary – File amended 941-X forms or consult with a CPA.
- Avoid “ERC mills” – Work only with licensed professionals like Enrolled Agents or CPAs.
Legal Risks of Non-Compliance
Businesses found guilty of intentional fraud may face:
- Penalties up to 75% of the underreported tax.
- Civil audits or even criminal investigations under IRC Section 7201.
How Dallas Tax Hub Can Help
At Dallas Tax Hub, we specialize in ERC audit representation and IRS dispute resolution. If you’re unsure about your eligibility or already under review, our licensed professionals can guide you through the proper steps while protecting your rights.
Conclusion
ERC enforcement will remain a key priority for the IRS in 2025. Don’t let an honest mistake become a costly audit. Contact Dallas Tax Hub today for a compliance check or risk assessment.