Letter 105-C Starts a Clock

Letter 105-C is the document that starts the second fight. It's the IRS's notice that an ERC claim has been disallowed in whole; Letter 106-C covers a partial disallowance.¹ The moment that letter is mailed by certified or registered mail, 26 U.S.C. § 6532(a) gives the taxpayer two years to either resolve the claim administratively or file a refund suit in federal court.² Protesting to the IRS Independent Office of Appeals feels like the responsible next step: build the record, let a reviewer look at it, avoid the expense of litigation. The statute says otherwise. Under § 6532(a)(4), "any consideration, reconsideration, or action by the Secretary" after that letter goes out "shall not operate to extend the period within which suit may be begun."² The clock keeps running while the case sits in Appeals.

No exception for a good reason

The only thing that legally extends the two-year window is § 6532(a)(2): "such period as may be agreed upon in writing between the taxpayer and the Secretary."² That written agreement is Form 907, "Agreement to Extend the Time to Bring Suit."

In United States v. Brockamp, the Supreme Court held that the companion administrative-claim deadline carries no implied equitable exception.³

The IRS's own form warns you not to trust it

Form 907 looks, at first read, like the fix: sign an agreement, get more time, stop watching the calendar. "This agreement will not be effective until the appropriate Internal Revenue Service official signs this form on behalf of the Commissioner of Internal Revenue," it reads. "You should therefore be prepared to protect your interests by bringing suit, if desired, at any time before this agreement is signed."⁴ A taxpayer-signed, IRS-unsigned Form 907 protects no one. A joint return needs both spouses' signatures unless one holds a power of attorney for the other; a corporation needs an authorized officer; a representative needs power of attorney on file; a fiduciary needs a Form 56.⁴ Miss any of those formalities and the "agreement" that was supposed to stop the clock isn't an agreement at all.

When nobody signs in time

The National Taxpayer Advocate's 2025 annual report to Congress recorded the result: "The IRS already rejected 316 taxpayer ERC protests because the two-year deadline expired," a number the report says "is sure to increase."⁵ The Advocate traced the cause to an operational gap on the IRS's own side: when a case is "in an administrative limbo such as waiting for AM to transfer a protest to Appeals, or for Appeals to assign the case to an Appeals Officer, taxpayers have no clear path to submit the form."⁶ The taxpayers who did everything the system asked of them (filed a claim, received a disallowance, protested, waited for a decision) are the ones the report says can miss the deadline "through no fault of their own."⁶

Roughly 28,000 ERC disallowance notices went out in the summer of 2024, many generated by risk-filter screening rather than a completed examination.⁷ The average case moving through IRS Compliance and Appeals in fiscal 2025 — all cases, not just ERC cases — took 337 days to resolve, close to half of the two-year window, before a taxpayer has filed anything in court.⁸ And the claims that hadn't reached a decision by the end of 2025 didn't get more time to wait: the IRS told GAO it had closed all remaining ERC claims, aside from those under examination or appeal, by December 31, 2025. That left about 41,000 claims in examination or appeals as of December 31, 2025, the active stock of cases where a 105-C letter, and the clock behind it, is either already running or about to start.⁹ For the week ending August 29, 2026, the IRS put the remaining ERC claims at about 14,900, including 3,600 under audit and 1,400 with the Independent Office of Appeals.¹⁰

A narrow fix, from April 2026

On April 27, 2026, the IRS announced a streamlined path around its own bottleneck: IR-2026-58 created notice CP320B, sent to taxpayers who are (1) still waiting for the IRS to consider their response to a 105-C or 106-C and (2) within six months of their deadline. Recipients can submit Form 907 through the IRS Document Upload Tool, referencing CP320B, instead of chasing down the correct division office on their own.¹¹ It is a real fix for the specific failure the Advocate documented (a countersigning office that couldn't be found in time), and it says something on its own that the agency needed a dedicated notice, a dedicated web form, and a press release to make sure its own extension mechanism could be executed before the deadline it was meant to extend. It does not help a taxpayer who isn't in that six-month window, whose Appeals matter has already closed, or who never learns the CP320B process exists.

Notes

1. IRS, "Understanding Letter 105-C, Disallowance of the Employee Retention Credit," captured Sept. 19, 2026, IRS Understanding Letter 105 C 2026 09 19 (original: irs.gov). ↩
2. 26 U.S.C. § 6532(a)(1)-(4) (2024 ed.) (two-year period from mailing of notice of disallowance by certified or registered mail; extension "for such period as may be agreed upon in writing between the taxpayer and the Secretary"; written waiver of notice starts the period on the waiver's filing date; "any consideration, reconsideration, or action by the Secretary" after the disallowance notice "shall not operate to extend the period within which suit may be begun"). ↩₁ ↩₂ ↩₃
3. United States v. Brockamp, 519 U.S. 347 (1997), https://supreme.justia.com/cases/federal/us/519/347/. ↩
4. IRS, Form 907, "Agreement to Extend the Time to Bring Suit" (Rev. Jan. 2026), Source document, https://www.irs.gov/pub/irs-pdf/f907.pdf. ↩₁ ↩₂
5. National Taxpayer Advocate, 2025 Annual Report to Congress, Most Serious Problem #1 (Amended Returns), p. 15 (PDF p. 50) and n.60, citing an IRS response to a TAS information request dated Dec. 1, 2025; first published at Arc Publication 2104 2025 Web 2026 09 19 Pdf (original: taxpayeradvocate.irs.gov). ↩
6. Id., "Form 907: A Broken Safeguard," pp. 14–15 (PDF pp. 49–50). ↩₁ ↩₂
7. Taxpayer Advocate Service, "Protect Your Employee Retention Credit Claim: Use IRS's New Streamlined Process to Request an Extension," NTA Blog, Apr. 27, 2026, first published at Tas Nta Blog Protect Your Erc Claim 2026 04 27 2026 09 19 Html (original: taxpayeradvocate.irs.gov) (approximately 28,000 ERC disallowance notices issued in summer 2024, many following risk-filter screening rather than a completed examination). ↩
8. Id. (average time from appeal request to resolution, IRS Compliance and Appeals combined, fiscal year 2025, "all cases – not just ERC cases": 337 days). ↩
9. U.S. Government Accountability Office, COVID-19 Relief: IRS Can Use Lessons Learned to Address and Prevent Improper Payments in Future Tax Programs, GAO-26-107456, February 10, 2026, pp. 27, 30, Source document, GAO 26 107456 (original: gao.gov). ↩
10. IRS, "Employee Retention Credit" program page, inventory for the week ending August 29, 2026 (page updated Sept. 8, 2026), IRS.gov: Employee Retention Credit (program page, retrieved 2026-09-19) (original: irs.gov). ↩
11. IRS, IR-2026-58, "IRS announces new option for certain taxpayers to request more time after ERC claim disallowance," Apr. 27, 2026, IRS Ir 2026 58 2026 09 19 (original: irs.gov) (eligibility: waiting for the IRS to consider a response to Letter 105-C or 106-C, and six months or less remaining on the two-year period; submission via IRS.gov/DUTReply, notice "CP320B"); IRS, "Understanding Your CP320B Notice," IRS Understanding Your Cp320b Notice 2026 09 19 (original: irs.gov). ↩

Primary sources used in this article

• 26 U.S.C. § 6532(a) (2024 ed., govinfo)
• IRS Form 907, "Agreement to Extend the Time to Bring Suit" (Rev. Jan. 2026), irs.gov
• IRS, "Understanding Letter 105-C, Disallowance of the Employee Retention Credit," irs.gov
• IRS, IR-2026-58 (Apr. 27, 2026) and "Understanding Your CP320B Notice," irs.gov
• United States v. Brockamp, 519 U.S. 347 (1997).
• National Taxpayer Advocate, 2025 Annual Report to Congress.
• Government Accountability Office, GAO-26-107456.
• Taxpayer Advocate Service NTA Blog, "Protect Your Employee Retention Credit Claim" (Apr. 2026)