Employee Retention Credit Claims: IRS Backlog and Your Options

IRS Still Working Through Employee Retention Credit Backlog

The IRS is continuing to work through a large backlog of Employee Retention Credit (ERC) claims, with approximately 20,600 claims still in the pipeline as of May 30, 2026.

The ERC was a COVID-19 relief program designed to provide a refundable payroll tax credit to eligible businesses that experienced certain government-ordered shutdowns or significant declines in gross receipts during the pandemic.

Where Are the Claims in the Process?

According to the latest figures, the IRS backlog includes:

• 3,500 claims currently under review

• 4,000 claims pending payment or disallowance

• 5,500 claims under audit

• 6,000 claims waiting for IRS review of taxpayer responses to previously disallowed claims

• 1,600 claims with the IRS Appeals Office

With thousands of claims still being reviewed, businesses that filed for the ERC may continue to experience delays.

What If the IRS Disallows Your ERC Claim?

If you received IRS Letter 105-C or Letter 106-C stating that your ERC claim was disallowed, you may still have options if you disagree with the IRS's decision.

Depending on your situation, you may be able to:

Request an administrative appeal: You can ask the IRS to take another look at the determination.

Request an Appeals Office review: You may be able to have your case reviewed by the IRS Independent Office of Appeals.

File a lawsuit: In certain circumstances, taxpayers may choose to challenge the IRS determination in federal court.

Because the process can be complicated, it's important to understand your options and applicable deadlines before deciding how to proceed.

What If You Filed an ERC Claim You Don't Qualify For?

If you submitted an ERC claim and later realize that your business wasn't eligible, you may be able to withdraw the claim.

However, withdrawal generally needs to occur before the IRS sends your refund. If the IRS has already sent the refund, additional requirements may apply, including whether the refund check has been deposited or cashed.

The Bottom Line

ERC claims continue to receive attention from the IRS, and the agency is actively reviewing claims, conducting audits, and handling appeals. If you have an outstanding ERC claim or received a notice that your claim was disallowed, don't ignore the notice. Review the IRS correspondence carefully and consider speaking with a qualified tax professional about your options and any deadlines that may apply.

**ERC rules and procedures can be complex and continue to evolve. This information is for general educational purposes and should not be considered legal or tax advice for your specific situation.