On April 27th, the IRS announced a method for certain taxpayers to request additional time to pursue an administrative appeal when the IRS has disallowed its COVID-era Employee Retention Credit (ERC) claim before they must file suit. (IR-2026-58).
When the IRS disallows an ERC claim, it issues Letter 105‑C or 106‑C, triggering a two‑year period for the taxpayer to either resolve the issue administratively or file a refund suit in federal court. However, filing an appeal of the disallowance with the IRS Independent Office of Appeals does not suspend or extend this statutory deadline.
Employers that have six months or less remaining to file suit, and whose ERC claims remain under IRS review, may now submit a Form 907, “Agreement to Extend the Time to Bring Suit,” through the IRS’s new online tool at IRS.gov/DUTReply by selecting notice CP320B from the drop-down menu. The process allows taxpayers to avoid losing refund rights while their ERC claims remain under review. The IRS will notify taxpayers in writing whether it agrees to the extension and will return countersigned forms when approved.
The IRS is issuing Notice CP320B to taxpayers it has identified as eligible, but employers may still qualify even if they do not receive the notice. More detailed instructions are available at IRS.gov/erc105c and IRS.gov/erc106c.
A properly executed Form 907, signed by both the taxpayer and the IRS before the deadline, extends the time for the IRS to complete its review and preserves the employer’s right to file suit if necessary.
Employers with disallowed ERC claims should pay attention to the date on their IRS Letter 105‑C or 106‑C. Once the two‑year period expires without a suit having been filed, the IRS cannot issue a refund, making timely action critical to preserve the ability to recover refunds of ERC claims that are ultimately approved by the IRS.
The IRS said it will continue processing ERC claims and appeals under established procedures, adding that the new streamlined process is intended to provide taxpayers with timely information about their rights and available options.
In a blog post, National Taxpayer Advocate Erin Collins stated that “This new streamlined process for ERC claims is a step in the right direction toward protecting taxpayer rights, but it highlighted a broader issue.” Collins went on to state that “The two-year deadline under IRC section 6532(a) is unforgiving, and too many taxpayers, practitioners, and IRS employees are unaware of its consequences until it is too late.”
For more information about this update, contact Liskow attorneys Caroline Lafourcade, Leon Ritteneberg, III and Kevin Naccari, and visit Liskow’s Tax Practice page.
Employers that have six months or less remaining on their statute of limitations to file suit and are still waiting for the IRS to consider their response to a disallowance letter may now submit a Form 907, “Agreement to Extend the Time to Bring Suit,” to the IRS through a new online tool, to avoid losing refund rights while their ERC claims remain under review.