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)
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)
- You have responded to that letter (protested or submitted additional info). (irs.gov)
- You have six months or less remaining in the two-year period to file suit or finalize the dispute. (irs.gov)
What to Do Now
If you meet the criteria above, follow these steps:
- 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)
- 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)
- 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)
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)
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)
- 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.