Facing an ERC Denial? Protect Your Refund with Form 907

How to Appeal an ERC Claim Denial & Use IRS Form 907

If your business is one of the thousands caught in the Employee Retention Credit (ERC) backlog, you already know how stressful the waiting game has been. But lately, the stress has shifted. The IRS has been issuing massive waves of full or partial ERC claim disallowances via Letter 105-C and Letter 106-C.

For many honest business owners who qualified for the pandemic-era relief, receiving one of these denial letters felt like the end of the road. Even worse, a strict two-year statutory deadline means businesses have a ticking clock to resolve the dispute or file an expensive federal lawsuit before their right to a refund expires forever.

Fortunately, the IRS recently announced a crucial administrative update. If you are facing an ERC disallowance appeal, you may now have a streamlined pathway to buy more time, protect your rights, and avoid the “litigation nightmare” of rushing into federal court.

Here is what you need to know about the new Form 907 extension process and how to navigate an ERC appeal successfully.

The Ticking Clock: Understanding Letters 105-C and 106-C

When the IRS formally denies an ERC claim, they issue one of two notices:

• Letter 105-C: Full disallowance of your ERC claim.

• Letter 106-C: Partial disallowance of your ERC claim.

The moment the IRS dates that letter, a strict two-year clock begins. By law, you have exactly 24 months from that date to either resolve the dispute administratively through the IRS or file a refund lawsuit in U.S. District Court or the U.S. Court of Federal Claims.

The Trap: Filing a formal protest with the IRS Independent Office of Appeals does not pause or extend this two-year deadline. If your appeal drags on past the two-year mark without a resolution, the IRS is legally barred from paying your refund—even if they eventually agree you were right.

The Solution: The New Form 907 Streamlined Extension

Recognizing that the Independent Office of Appeals is facing a massive bottleneck of ERC audit appeals, the IRS has rolled out a standardized method to hit the pause button.

Taxpayers can now submit IRS Form 907 (Agreement to Extend the Time to Bring Suit) directly to the government. This legally extends the two-year deadline, giving the IRS more time to review your documentation and protecting your right to a refund without forcing you to file an immediate lawsuit.

Who is Eligible for the Extension?

You can take advantage of this new pathway if you meet two specific criteria:

1. You have already filed a formal response or appeal to an ERC denial (Letter 105-C or 106-C).

2. You have six months or less remaining before your two-year statutory deadline expires.

How to File the Extension

The IRS is actively mailing Notice CP320B to businesses it identifies as eligible. However, even if you haven’t received this notice, you can still apply proactively. Read the official IRS CP320B Guidance to review the structural steps required for filing.

To submit, you must upload a completed Form 907 through the official IRS Document Upload Tool (DUT). When using the tool, bypass the access code prompt and select notice “CP320B” from the drop-down menu to route your extension to the correct centralized IRS unit.

Note: The extension is only legally valid once an IRS official countersigns the form.

How to Overturn an IRS ERC Denial

An IRS examiner’s initial denial is not the final word. Many legitimate claims were rejected simply due to documentation gaps or aggressive, automated IRS sweeping. To successfully navigate the ERC appeals process, focus on these core components:

• Gather Bulletproof Documentation: If you claimed eligibility based on a government shutdown order, you must provide the exact government mandate and prove it caused a “full or partial suspension” of your specific operations.

• Submit a Thorough Written Protest: Work with a qualified tax professional to draft a formal protest within 30 days of your denial. It must clearly outline the facts, dispute the examiner’s findings point-by-point, and cite relevant IRS notices and tax code authorities.

• Be Prepared for a Wait: Due to high caseloads, the IRS Independent Office of Appeals is taking anywhere from 6 to 18 months to process these cases. This is precisely why securing a Form 907 extension is so critical to protecting your business’s financial interests.

Authority Resources & Further Reading

To learn more about tracking your claim, checking eligibility, or submitting an appeal, consult the official IRS guidelines and professional tax insights:

• Official IRS Portal: IRS Employee Retention Credit Information Hub – The centralized page for all ERC updates, eligibility criteria, and compliance.

• Understanding Full Disallowances: IRS Instructions for Letter 105-C – The official agency breakdown of what to do if your claim is fully denied.

• Understanding Partial Disallowances: IRS Guidelines on Letter 106-C – Detailed breakdown of partial denials and the process for submitting Form 907.

• Taxpayer Advocacy Insights: Taxpayer Advocate Service Letter 105-C Portal – An inside look at your taxpayer rights and options when facing an administrative claim disallowance.

• Official Press Update: IRS Newsroom Announcement – The original agency announcement authorizing the streamlined Form 907 submission method via the Document Upload Tool.

Don’t Face the IRS Alone—Protect Your ERC Refund Today

Navigating an IRS audit or an ERC disallowance appeal requires highly specialized tax strategy and precise execution. A single missing document or a missed deadline can cost your business tens of thousands of dollars in lost relief.

At JD Tax & Accounting Advisors, we help small businesses build robust tax strategies, stay fully compliant, and confidently handle complex IRS disputes. Don’t let a ticking clock decide the financial future of your business.

Contact JD Tax & Accounting Advisors today to schedule a professional consultation and protect the relief your business earned.