1. What to Check First in Your ERC Disallowance Notice
Start with the letter and the return it addresses. A refund delay or request for records does not necessarily mean the IRS has formally denied your claim. A disallowance notice identifies a decision you can dispute and a timeline you need to track.
Read Beyond the Letter Number
Letter 105-C generally reports a claim disallowance. Letter 106-C reports a partial claim disallowance, but it can deny all ERC while allowing another adjustment on the return. Receiving 106-C does not necessarily mean the IRS approved some ERC.
Compare the notice with your Form 941-X and worksheets. Check the employer’s name and EIN, tax quarter, amount claimed, amount allowed, and reason for denial. Keep the letter and envelope, particularly if the mailing date needs verification.
Identify the Issue You Need to Resolve
A filing-date dispute requires different proof than a disagreement about eligibility. A reduced credit may involve wage limits, excluded wages, or the calculation rather than the employer’s eligibility.
The rules for tax credits provide context, but your response must address the determination in your notice. ERC is an employer credit under federal tax law, not a credit for individuals merely because they paid personal income tax.
2. Support Each Disputed Quarter with Relevant Records
Build the response around what you need to establish for each quarter. A preparer’s eligibility opinion can explain the original claim, but it cannot substitute for the business and payroll records supporting it.
Match the Reason for Denial to the Evidence
| Disputed Issue | Records to Review | Point to Explain |
|---|---|---|
| Government-order suspension | Binding orders, effective dates, operational records | How the order affected operations during the claimed period |
| Gross receipts decline | Quarterly records and comparison-period records | The applicable test, calculation, and aggregation analysis |
| Qualified wages or credit amount | Payroll records, employee-level worksheets, PPP forgiveness records | Which wages qualify and how you calculated the credit |
| Filing timing | Filed return, mailing records, certified-mail receipts | When and how you submitted the claim |
Government-order suspension
- Records to ReviewBinding orders, effective dates, operational records
- Point to ExplainHow the order affected operations during the claimed period
Gross receipts decline
- Records to ReviewQuarterly records and comparison-period records
- Point to ExplainThe applicable test, calculation, and aggregation analysis
Qualified wages or credit amount
- Records to ReviewPayroll records, employee-level worksheets, PPP forgiveness records
- Point to ExplainWhich wages qualify and how you calculated the credit
Filing timing
- Records to ReviewFiled return, mailing records, certified-mail receipts
- Point to ExplainWhen and how you submitted the claim
For third- and fourth-quarter 2021 claims, federal law bars allowance or refund after July 4, 2025, unless the claim was filed on or before January 31, 2024. If the IRS relies on this restriction, proof of timely filing matters independently of whether the employer otherwise qualified.
Show What the Records Establish
For a suspension argument, identify the relevant government-order provision and explain its effect on the business. General descriptions of pandemic disruption leave that connection unclear.
For a gross receipts argument, provide underlying records and explain the comparison. Address aggregation where applicable. Review wage exclusions, PPP overlap, and employee-level calculations before defending the amount claimed.
If you find a calculation error, include the original and corrected worksheets with an explanation. That approach also helps keep related tax audits and adjustments consistent with the ERC response.
3. Request an ERC Appeal and Track the IRS Response
Submitting documents does not necessarily request Appeals review. If you want the IRS Independent Office of Appeals to consider unresolved issues, state that request expressly and follow the applicable protest requirements.
Send the Request through the Office Identified in the Notice
Follow the letter’s instructions for submitting your dispute. Generally, send the protest to the IRS address listed in the notice rather than directly to Appeals.
Identify the determination, disputed periods and amounts, relevant facts, reasons you disagree, and supporting records. Include any required signed declaration. An authorized representative can submit Form 2848 to represent the employer before the IRS.
Confirm the Case’S Current Stage
The IRS reviews your explanation and documents before referring the dispute to Appeals. It may revise the determination and process the claim without that referral.
If the IRS maintains the denial and you requested an appeal, it can forward the case for independent review. Letter 86-C may notify you of the transfer; Appeals then contacts you separately.
If you sent records without requesting an appeal, do not assume that an unfavorable response automatically sends the case to Appeals. Keep copies of your request, submission confirmation, and subsequent letters so you can establish what you asked the IRS to review.
4. Protect the Refund Suit Deadline during Administrative Review
The deadline for a refund suit continues while the IRS reviews your response. Internal Revenue Code §6532(a) generally gives you two years from the mailing of a disallowance notice by certified or registered mail. Reconsideration does not restart that period.
Separate the Requested Response Period from the Suit Deadline
The IRS generally asks employers to dispute ERC disallowances within 30 days. Missing that requested response period does not automatically eliminate every remedy. Still, submitting an appeal near the end of the two-year period may leave little time to resolve the claim or protect your right to sue.
Track each notice and affected period separately. A status inquiry, additional documents, or a pending appeal does not itself extend the deadline.
Confirm That Both Parties Signed Form 907
Form 907 allows the taxpayer and IRS to agree in writing to extend the time to bring suit. Both the taxpayer and an authorized IRS representative must sign before the existing period expires. Your submission confirmation is not a completed extension agreement.
Current IRS procedures provide an upload route for certain employers awaiting a response with six months or less remaining. If you know your assigned Appeals Officer, contact that officer about an extension.
A favorable Appeals decision also does not itself extend the deadline. If payment remains outstanding as the period approaches its end, review whether a completed extension or timely suit is needed.
Refund litigation generally proceeds in a federal district court with jurisdiction or the U.S. Court of Federal Claims. Evaluating filing prerequisites, the proper court, and remaining time falls within tax controversy and litigation.
5. Frequently Asked Questions
The IRS withdrawal program does not apply to the tax periods covered by Letter 105-C or 106-C. Other quarters may have a different processing status. Check each period separately before considering withdrawal.
A qualified CPA, enrolled agent, or attorney may represent an employer before Appeals. Court representation follows separate rules. Form 2848 authorizes IRS representation; it does not authorize a representative to appear in court.
6. Prepare for a Review of Your Denied ERC Claim
An individual review can help when the notice conflicts with your records, different quarters raise different issues, or the refund suit deadline approaches before the IRS finishes its review.
Bring the notices, Forms 941-X, worksheets, supporting records, and proof of prior submissions. Include any Form 907 and the countersigned agreement. An attorney can use that record to assess the disputed amount, identify missing evidence, and determine which procedural options remain available.
05 Oct, 2026
