ERC Refund in 2026: One Great Way to Handle It

If your business receives an Employee Retention Credit (ERC) refund in 2026 for wages paid in 2020 or 2021, you may have an important tax planning opportunity.

Why ERC Refunds Are Arriving in 2026

Many businesses filed ERC claims years after they filed their original income tax returns. Because the IRS took so long to process many claims, taxpayers are only now receiving some refunds, even though the related tax years are closed.

Current IRS Guidance

To address this situation, the IRS currently allows taxpayers to report the ERC refund as taxable income in the year they receive it. Following this guidance can help you avoid unnecessary disputes with the IRS. At the same time, you may want to protect your rights. Some tax professionals believe the IRS’s position could ultimately be rejected by the courts. If that happens, taxpayers who paid tax on their ERC refunds may be entitled to a refund.

A Protective Refund Claim May Preserve Your Rights

One way to preserve that opportunity is to file a protective refund claim after reporting the income on your 2026 return. This approach complies with current IRS guidance. It also keeps the door open to recover the tax if the law changes in your favor.

How We Can Help

Sterling Tax and Accounting is here to help your business with tax planning!  Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket.  If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.

Learn how to proactively save on taxes by scheduling a call with our tax planning specialists. Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes. Welcome to the Sterling Standard of business!  Want to learn more?  Schedule a meeting with our tax planning team.