IRS Offers New Option for Businesses Dealing with ERC Claim Denials

On April 27, 2026, the Internal Revenue Service (IRS) announced “a new, streamlined way” for businesses to deal with Employee Retention Credit (ERC) denials. While the ERC was a pandemic-era program, the IRS and other federal authorities are continuing to aggressively target ERC fraud in 2026, and this aggressive approach has led to the denial of valid claims in many cases. Learn more from Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group.

IRS Extends Deadline to Dispute ERC Claim Denials and Seek Refunds

Businesses across the country are dealing with ERC denials. While some of these businesses claimed the ERC improperly (and may be at risk of facing ERC fraud allegations as a result), others are entitled to the credits they claimed. The IRS recognizes this, and it has allowed businesses to dispute denials of their ERC claims through various means.

However, as the IRS explains in its recent announcement, once a business receives a denial notice (IRS Letter 105-C or 106-C), the business “generally [has] two years from the date of that letter to resolve their claim administratively or to file a refund suit in Federal court if they disagree with the IRS’s decision.” As the IRS goes on to explain, “[a]fter the two-year period ends, the IRS cannot issue a refund, even if it later decides in the taxpayer’s favor after reviewing the disallowance.”

To ensure that businesses have enough time to challenge their ERC disallowances, the IRS is now allowing this two-year deadline to be extended under the following circumstances:

• The business is waiting for the IRS to consider its response to Letter 105-C or Letter 106-C; and,
• The business has six months or less before the two-year deadline expires.

If a business meets both of these conditions, it can request additional time by filing IRS Form 907 (Agreement to Extend the Time to Bring Suit). Once countersigned by the IRS, this extends the taxpayer’s time to file suit against the IRS for any refund owed.

Should Your Business Request an Extension?

While requesting an extension can help ensure that businesses remain eligible to receive refunds for improperly denied ERC claims, it can also lead to additional scrutiny from the IRS. As the IRS explains, properly submitted requests “will be given due consideration by the IRS,” and the IRS will inform businesses in writing “whether the IRS has agreed to the extension.” With this in mind, informed decision-making is critical, and for businesses that have submitted improper ERC claims (whether intentionally or inadvertently), it will be important to consider the other options that are available.

Request a Consultation with Washington D.C. Tax Attorney Kevin E. Thorn

If you have questions related to your business’s ERC claim (or claims), we invite you to get in touch. We can help you make informed decisions about your next steps and, as warranted, deal with the IRS on your behalf. To request a consultation with Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 202-349-4033 or contact us confidentially online today.