Another Pandemic-Era Refund Topic — This Time It's About Your Business!
Hello to all our Chinese business owner friends in Austin! As an Austin-based Chinese CPA firm, we still occasionally receive client questions about pandemic-era business refunds. Previously, we reviewed the deadline for individuals to claim the Recovery Rebate Credit. This time, we'll discuss a policy that businesses which kept operating and retained employees during the pandemic in 2020 and 2021 were once eligible for — the Employee Retention Tax Credit (ERTC).
Editor's Note (updated July 16, 2026): This article originally followed the filing timeline as it stood around 2024. In fact, the ERTC filing windows have all closed: the 2020 window closed on April 15, 2024, and the 2021 window closed on April 15, 2025. In addition, the OBBBA (P.L. 119-21), passed in July 2025, retroactively disallowed 2021 third- and fourth-quarter claims filed after January 31, 2024. The article below has been revised into a retrospective review and risk alert.
Some of you may ask: "It's been several years — can I still apply now?" The answer is no — the filing windows have all closed. This article will review what this credit was, what the eligibility criteria were at the time, and what businesses that already filed claims still need to watch out for now. If you're not yet familiar with the overall tax filing process, please refer to our previous Chinese Tax Filing Guide.
What Exactly Was the Employee Retention Tax Credit (ERTC)?
Simply put, the ERTC was a federal tax credit designed to encourage businesses not to lay off employees during the worst of the pandemic in 2020 and 2021. If a business met certain conditions during this period, it could once have qualified for a substantial cash refund. This was not a loan — it was real cash refunded to the company's account, used to offset the federal employment taxes withheld when paying employee wages at the time.
So what were the eligibility requirements back then? There were two main categories, and a business only needed to meet one of them. The first was a "government-mandated suspension of operations." For example, a restaurant required to suspend dine-in service due to a government health order, or a clinic ordered to stop non-emergency procedures, both fell into this category. The second — and more common — situation was a "significant decline in gross receipts." The IRS applied different standards for 2020 and 2021: for 2020, gross receipts in any quarter had to be down more than 50% compared with the same quarter in 2019; for 2021, a decline of more than 20% compared with the same quarter in 2019 was sufficient.
Recap of the Filing Timeline: How Did the Window Close?
Tax filings have a "lookback period," typically three years from the date the return was due. For the ERTC, businesses needed to file an amended employment tax return (Form 941-X) to claim the credit.
Let's review the timeline: for credits eligible in 2020, the amended return had to be filed no later than April 15, 2024; for 2021, the deadline was April 15, 2025. Both dates have now passed. In addition, the OBBBA (P.L. 119-21), enacted in July 2025, retroactively provides that any 2021 third- and fourth-quarter ERTC claims filed after January 31, 2024 will not be honored. In other words, even claims submitted within the originally applicable deadline may have since been invalidated by this law if filed later than that cutoff.
Many of our Chinese tax clients in Austin either overlooked this policy at the time because they were busy running their businesses, or felt the application process was too complicated and put it off. Now that the window has closed, there is no way to file late. This is yet another reminder that tax benefits worth tens of thousands or even hundreds of thousands of dollars often come with strict deadlines — timely assessment of eligibility is critical.
Filing Has Ended, but Audits Continue: Beware of "Promotional" Aftereffects
At the core of an ERTC claim was Form 941-X, which required careful calculation of payroll, gross receipts, and the corresponding credit amount. At the time, a large number of "ERTC promoter" companies emerged in the market, using aggressive or even fraudulent tactics to lure business owners into filing ineligible claims while charging high fees. This drew heightened scrutiny from the IRS.
It's worth specifically noting: the closing of the filing window does not mean the risk is over. The IRS is still reviewing and auditing ERTC claims that were already filed (the OBBBA extended the related assessment statute of limitations to 6 years), and erroneous or inflated claims may be required to be repaid, along with penalties and interest. If your business filed through a third-party promoter at the time, we recommend organizing and carefully preserving payroll records, revenue statements, government shutdown orders, and other supporting documentation as soon as possible. If you receive a letter from the IRS, do not ignore it — contact a professional tax accountant right away. For more on complex tax topics, please refer to our Tax Insights column.
YZ CPA Note
The ERTC filing windows have all closed. If anyone is still trying to sell you on "still being able to claim ERTC refunds," please stay vigilant — this is most likely a scam. Businesses that already filed claims should keep all supporting documentation on hand in case of audit (the applicable assessment period can extend up to 6 years). If you have doubts about a claim filed by a promoter at the time, we recommend having a professional accountant review it as soon as possible to assess your potential exposure, and respond promptly to any notice received from the IRS. If you still hold overseas accounts, don't forget to stay on top of the related filing obligations — for example, our FBAR Filing Guide has detailed information.