The US Internal Revenue Service (IRS) has outlined a new mechanism allowing some taxpayers to seek extra time after their Employee Retention Credit (ERC) claims are turned down.
After the IRS disallows an ERC claim, it sends taxpayers Letter 105-C or 106-C.
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Taxpayers typically have a two-year window from the date on these letters to either resolve the dispute within the IRS system or file a refund lawsuit in federal court if they contest the outcome.
Many taxpayers choose to challenge the denial through the IRS Independent Office of Appeals. However, an appeal does not pause or extend the two-year deadline.
Once that two-year period has elapsed, the IRS is legally unable to pay a refund, even if a later review of the disallowance would otherwise favour the taxpayer.
The exact deadline in each case is determined by the date shown on the original 105-C or 106-C notice.
Acknowledging that some taxpayers are approaching the end of this period, IRS is now allowing requests for more time through Form 907, Agreement to Extend the Time to Bring Suit.
An extension may be requested where a taxpayer is waiting for the IRS to evaluate their reply to a disallowance under Letter 105-C or 106-C and has six months or less remaining on the two-year deadline.
Under existing rules, the IRS and a taxpayer can formally agree in writing to extend the deadline for filing suit, provided both parties sign Form 907 before the original two-year limit expires.
The agency said the new process is meant to give taxpayers clear, timely information on their rights and options, thereby “observing taxpayers’ rights”.
The IRS recently issued a whistleblower alert on suspected misuse or fraud involving federal funds by tax‑exempt entities, individuals and businesses.
The agency urged the public to submit information on alleged fraud involving federal funds and grants.
