Compliance
How to Protect Your ERC Claim Using IRS’s New Extension Process
A recent IRS announcement could be a lifeline for taxpayers facing deadlines after Employee Retention Credit (ERC) disallowances—know how to use it before time runs out.
By NomadicTax Research Team • 5-8 min read • May 18, 2026
## What’s Changed?
In late April 2026, the IRS introduced a **streamlined process** for certain taxpayers to request more time if their Employee Retention Credit (ERC) claim has been disallowed via **Letter 105-C or 106-C**. This change is aimed at preserving rights to recover refunds or file suit under IRC § 6532(a), which imposes a strict two-year deadline after the disallowance letter date. ([irs.gov](https://www.irs.gov/newsroom/irs-announces-new-option-for-certain-taxpayers-to-request-more-time-after-erc-claim-disallowance?utm_source=openai))
## Who Qualifies?
You’re eligible for this new extension if all of the following are true:
* You received a Letter 105-C or 106-C for an ERC claim that was disallowed or partially disallowed. ([irs.gov](https://www.irs.gov/newsroom/irs-announces-new-option-for-certain-taxpayers-to-request-more-time-after-erc-claim-disallowance?utm_source=openai))
* You have responded to that letter (protested or submitted additional info). ([irs.gov](https://www.irs.gov/newsroom/irs-announces-new-option-for-certain-taxpayers-to-request-more-time-after-erc-claim-disallowance?utm_source=openai))
* You have **six months or less** remaining in the two-year period to file suit or finalize the dispute. ([irs.gov](https://www.irs.gov/newsroom/irs-announces-new-option-for-certain-taxpayers-to-request-more-time-after-erc-claim-disallowance?utm_source=openai))
## What to Do Now
If you meet the criteria above, follow these steps:
1. **Wait for IRS Notice CP320B** – IRS sends this notice to eligible taxpayers with six months or fewer left. It includes instructions on using **Form 907, Agreement to Extend the Time to Bring Suit**. ([irs.gov](https://www.irs.gov/newsroom/irs-announces-new-option-for-certain-taxpayers-to-request-more-time-after-erc-claim-disallowance?utm_source=openai))
2. **Form 907 Submission** – You must have IRS review your disallowance response, then prepare Form 907. It needs to be signed by both you and an IRS representative. → Submit via the IRS Document Upload Tool by selecting Notice “CP320B.” ([irs.gov](https://www.irs.gov/newsroom/irs-announces-new-option-for-certain-taxpayers-to-request-more-time-after-erc-claim-disallowance?utm_source=openai))
3. **Confirm Extension** – After submission, the IRS will either execute the form and return a countersigned copy or send a Letter 3064C if corrections are needed or if you don’t qualify. ([irs.gov](https://www.irs.gov/newsroom/irs-announces-new-option-for-certain-taxpayers-to-request-more-time-after-erc-claim-disallowance?utm_source=openai))
## Why It Matters
Failing to act before the two-year period expires means you **lose both your right to a refund and your ability to sue**, even if your claim later appears valid. The new process gives you a chance to protect those rights when delays in administrative review could otherwise cost you everything. ([taxpayeradvocate.irs.gov](https://www.taxpayeradvocate.irs.gov/news/nta-blog/protect-your-employee-retention-credit-claim/2026/04/?utm_source=openai))
## Example Scenario
- **ABC Corp.** gets Letter 105-C disallowing its claimed ERC for Q4 2021. That letter was dated August 1, 2024.
- Two-year period expires August 1, 2026. In March 2026, the tax practitioner responds with documentation but IRS has not yet informed ABC whether it will enter Appeals.
- On or about **February 2026**, ABC receives Notice CP320B (since less than six months remain).
- ABC submits **Form 907** electronically via the IRS Document Upload Tool referencing CP320B. IRS reviews, signs, returns form.
- ABC now has extension beyond August 1, 2026 to pursue administrative resolution or file a suit.
## Key Takeaways & Action Items
- Don’t wait—monitor the two-year deadline and track when you respond to disallowance letters.
- Be proactive—request an extension using Form 907 if you receive Notice CP320B or believe you’re eligible even without the notice. ([irs.gov](https://www.irs.gov/newsroom/irs-announces-new-option-for-certain-taxpayers-to-request-more-time-after-erc-claim-disallowance?utm_source=openai))
- Keep detailed records—date of letter, submission date of response, proof of delivery. Delays in filing or communication may imperil your rights.
- Consult a qualified tax professional to help prepare your Form 907 and navigate the appeals process.
This process is **not automatic**; you must request the extension before the statutory deadline ends. But if you act in time, this announcement can make all the difference in preserving your rights and potential refund.