WASHINGTON, D.C. — Taxpayers whose Employee Retention Credit claims have been denied can now request additional time to challenge those decisions, as the Internal Revenue Service rolls out a new process aimed at avoiding costly court disputes.
What This Means for You
- You may be able to extend the deadline to challenge a denied tax credit
- More time could allow your case to be resolved without going to court
- Action is required before the original two-year deadline expires
The IRS announced a streamlined option for taxpayers to extend the time to resolve disputes over disallowed Employee Retention Credit claims — a pandemic-era tax credit designed to help businesses keep workers on payroll.
When the IRS denies a claim, it issues a notice — typically Letter 105-C or 106-C — and taxpayers generally have two years from that notice to either resolve the issue administratively or file a lawsuit in federal court.
Why the Change Matters
Under existing rules, filing an appeal with the IRS Independent Office of Appeals does not pause that two-year deadline.
That means taxpayers could lose the ability to receive a refund if the deadline passes, even if the IRS later agrees with their position.
The new process allows eligible taxpayers to request an extension using Form 907 — a formal agreement between the taxpayer and the IRS to extend the time to file a lawsuit.
Who Qualifies for an Extension
Taxpayers can request more time if:
- They are waiting for the IRS to review their response to a disallowance notice
- They have six months or less remaining before the two-year deadline expires
If approved, the extension gives both the IRS and the taxpayer additional time to resolve the dispute without immediate litigation.
How to Request More Time
Eligible taxpayers can submit Form 907 through the IRS Document Upload Tool, an online system for responding to IRS notices.
The IRS is notifying some eligible taxpayers directly through Notice CP320B, which includes instructions for submitting the form.
Taxpayers who do not receive that notice may still qualify and can find guidance on IRS.gov.
What Happens Next
The IRS will review submitted extension requests and notify taxpayers in writing if the extension is approved.
Officials said the change is intended to give taxpayers more flexibility and clarity while preserving their ability to pursue refunds or legal action if needed.
Taxpayers are encouraged to review their deadlines carefully and contact the IRS using the phone number listed on their notice if they have questions.
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