Disputing Your Rejected ERC Claim
Audio version available here (1 min. 45 sec.)
When you’ve gone through the hard work of keeping your employees paid during the pandemic, filing your ERC claim, and waiting months or even years for it to be processed, it can be discouraging to receive a letter from the IRS rejecting your claim. Thankfully, there is a way to dispute the IRS’s ruling, and the timeline has been extended.
With the IRS accelerating its efforts to process 400,000 employee retention credit claims, it’s possible you will receive your claim’s verdict soon. Unfortunately, it is possible your claim will be disallowed, and no payment issued. If this happens, you originally had only thirty days to dispute the decision; now, the timeline has been extended to two years.
The IRS will send you notice of disallowance in Letter 105-C, which typically includes the following information:
“Reason for [its] decision.
Date of the decision.
Tax year or period for which the claim is denied.
Appeal rights.
Timeframe in which you must file suit if you wish to challenge [the IRS’s] denial in court.”
It is important to note that if you receive Letter 105-C, you are no longer eligible for the second Voluntary Disclosure Program nor the claim withdrawal program.
When you receive the letter and disagree with the IRS’s decision, you have two years to appeal. It is recommended you act swiftly if you decide to appeal, as there is no further extension of the two-year timeline. To appeal, respond to the letter with proper documentation of why you should be eligible for the employee retention credit, as well as the amount that you are claiming.
After you send in your dispute, the IRS “will first consider your explanation and documents before sending your request to the IRS Independent Office of Appeals”. If the IRS agrees with your reasoning, the ERC processing will proceed without further action, but if it doesn’t, then the case will be forwarded to the Office of Appeals.
Though it may initially be discouraging to receive a disallowance of your ERC claim, you have options and two years to dispute the IRS’s decision. If you do receive this ruling, then we highly recommend you first meet with your tax professional for advice on how to proceed. For the right guidance, reach out to the experts at XQ CPA. We are here to help you.
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