Key Takeaways:
- Taxpayers with denied ERC claims may now request additional time to preserve their right to pursue a refund without immediately resorting to litigation.
- Eligible taxpayers with six months or less remaining before their two-year deadline can submit Form 907 through the IRS Document Upload Tool for consideration.
- Acting before the statutory deadline expires is critical, as taxpayers may permanently lose the ability to recover their ERC refund claims if no extension or lawsuit is filed in time.
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On April 27, 2026, the IRS announced a new way for taxpayers to request additional time to dispute the denial of Employee Retention Credit (ERC) claims without litigation.
Why This Matters
The IRS generally issues Letters 105-C and 106-C to notify taxpayers of a full or partial denial of their ERC claims. Importantly, the issuance of either letter triggers a two-year period for the taxpayer to:
- Dispute the IRS’s disallowance and fully resolve its dispute with the IRS; or
- File a lawsuit against the U.S. government for refund of its ERC claim.
Once the deadline passes, the IRS is legally barred from issuing a refund even if the IRS later agrees with the taxpayer.
Many taxpayers who received ERC claim denial letters have requested a review of their claims by the Independent Office of Appeals. As a result, Appeals has been overwhelmed with requests to which it has been unable to timely respond.
The two-year deadline for many of these denied claims is quickly approaching, and taxpayers are left choosing between two unenviable options: abandon their ERC claims entirely or incur the cost of litigation against the U.S. government.
New Option for Taxpayers Approaching the Two-Year Deadline
For years, Appeals has offered taxpayers an extension to file suit against the government (and, thus, preserve the government’s capacity to issue a refund of their claims). Appeals only offered this extension in the rare instance it was unable to complete a taxpayer’s case within the statutory two-year period. Now, given the number of ERC denial cases left unresolved at Appeals, the IRS is permitting taxpayers to request such an extension directly from the government.
A taxpayer may be eligible to request an extension if both of the following apply:
- You previously responded to an ERC claim denial reported on Letter 105 C or 106 C; and
- You have six months or less remaining before your two year deadline expires.
How the Extension Works
The IRS and the taxpayer may agree in writing to extend the deadline using Form 907, Agreement to Extend the Time to Bring Suit. This agreement gives the IRS more time to review the claim and gives the taxpayer more time to file a lawsuit if needed. Both parties must sign the form before the original two year deadline expires.
What’s New
Eligible taxpayers can now offer the IRS an extension of the two-year period by signing and submitting Form 907 via the agency’s Document Upload Tool. This IRS tool directs users to either:
- Enter an Access Code, which is generally not provided on either Letter 105-C or Letter 106-C; or
- Select from a drop-down list of IRS Notice and Letter options to initiate its submission.
Taxpayers submitting a Form 907 for IRS consideration should bypass the tool’s request for an Access Code (selecting “No”) and, instead, select notice ‘CP320B’ from the drop-down list of IRS Notice and Letter options (i.e., do not search for Letter 105-C, Letter 106-C, or Form 907, which are not offered in the drop-down list).
Requests submitted through this process will be reviewed by the IRS, and taxpayers will be notified in writing whether their extension request is approved.
The IRS will issue Notice CP320B to certain taxpayers it has already identified as eligible for this extension process. However, if a taxpayer does not receive Notice CP320B but believes it qualifies for an extension, it may still submit Form 907 through the IRS Document Upload Tool.
What You Should Do Now
If you received an ERC denial Letter 105-C or 106-C and are unsure how much time you have left to recover your ERC claim without litigation:
- Review your original IRS letter carefully to determine the date of issuance; and
- Contact your tax advisor as soon as possible to assess whether an extension request is appropriate.
How MGO Can Help
The ERC claims process continues to evolve, creating challenges for taxpayers navigating denial letters, appeals backlogs, and strict statutory deadlines. MGO’s Tax Advocacy and Resolution professionals help taxpayers evaluate ERC claim denials, assess available administrative and litigation options, calculate critical filing deadlines, and determine whether pursuing a Form 907 extension request may be appropriate.
We can assist you with preparing and submitting extension requests, coordinating with IRS Appeals, and developing strategies to preserve refund opportunities while minimizing unnecessary litigation costs. When timing is critical, proactive guidance can help you protect your rights and make informed decisions about the path forward. Contact us to learn more.
Written by Allison Goodhartz, Katelyn Pascuzzi and Patrick Wallace. Copyright © 2026 BDO USA, P.C. All rights reserved. www.bdo.com