Extending Time To Sue After ERC Claim Disallowance

The IRS announced a new streamlined process for certain taxpayers to request an extension of the two-year time limit to bring a refund suit after receiving an ERC claim disallowance. The new streamlined process became available beginning April 27, 2026.

Background

When the IRS disallows an ERC claim, it issues Letter 105-C for a full disallowance or Letter 106-C for a partial disallowance. The taxpayer generally has two years from the date of a claim disallowance letter to file a refund suit in federal court. A taxpayer can request an extension of the two-year period by filing Form 907, “Agreement To Extend the Time To Bring Suit,” before the two-year period expires.

A taxpayer can administratively challenge a claim disallowance by filing a protest and requesting that their case be heard by the Independent Office of Appeals. Filing a protest and requesting a hearing in appeals does not extend the two-year statutory period for filing suit.

Backlogs in appeals have caused delays in cases being assigned. Meanwhile, the period to file suit continues to run. Prior to the recent announcement, taxpayers could not submit Form 907 if the case was not assigned in appeals. The new process provides a way to submit Form 907 even if the case hasn’t been assigned to an appeals employee.

Highlights of the streamlined process

The new process for submitting Form 907 is available to recipients of an ERC claim disallowance letter if the following two conditions are met:

• The taxpayer is waiting for the IRS to consider the taxpayer’s response to a Letter 105-C or 106-C disallowance.
• Six months or less remain until the two-year period to file a refund suit expires.

Crowe observation

The new streamlined process does not change the underlying statute of limitations for filing a refund suit. Instead, it uses an existing legal mechanism – a written agreement on Form 907 – to extend the time to bring suit, and it pairs that mechanism with a simplified intake process for a narrow ERC population whose claims have been disallowed.

Eligible taxpayers can submit Form 907 through the IRS Document Upload Tool (DUT) by navigating to irs.gov/dutreply and selecting Notice CP320B from the drop-down menu. Taxpayers will be notified in writing whether the IRS has agreed to the extension. If the IRS grants the extension, a countersigned Form 907 will be sent to the taxpayer or the taxpayer’s authorized representative. Merely submitting Form 907 to the IRS does not extend the filing period. There is no extension unless the IRS countersigns Form 907 before the two-year period expires.

Crowe observation

Eligible taxpayers should submit Form 907 early within the final six months of their two-year period, if possible, to avoid potential issues with turnaround times for the IRS to agree and sign.

The new submission method cannot be used for Form 907s relating to claim disallowances other than those tied to Letters 105-C or 106-C. A Form 907 unrelated to an ERC claim disallowance must be submitted through normal channels.

The IRS is sending Notice CP320B to taxpayers eligible for the new submission method. Additionally, the IRS has posted step-by-step instructions for submission of Form 907 using the DUT at irs.gov/cp320b.

Looking ahead

Taxpayers that received an ERC claim disallowance letter should consult their tax adviser to determine their best course forward. Taxpayers challenging the claim disallowance now have an opportunity to preserve their right to file a refund suit, even if they choose to go to the Independent Office of Appeals.