ERC Disallowance Defense Attorney | IRS Letter 105-C & 106-C Help
The IRS denied your Employee Retention Credit claim. That decision is contestable.
Over 84,000 Employee Retention Credit disallowance letters have been issued by the IRS since 2024. Many were generated through an automated risk-scoring model, without a human examiner ever reviewing the actual facts of the business that filed the claim.
If you received IRS Letter 105-C (full disallowance) or IRS Letter 106-C (partial disallowance), you are operating inside a strict two-year window to protect your rights. When that window closes, it closes permanently, even if the IRS later agrees the denial was wrong.
The tax attorneys at Cumberland Law Group, with offices in Atlanta, Raleigh, Charlotte, and Durham, represent business owners contesting ERC disallowances before the IRS and in federal court.
If your ERC claim has been denied, call Cumberland Law Group at (800) 960-5359 for a free consultation before your deadline expires.
What an ERC Disallowance Letter Actually Means
Letter 105-C is the IRS’s formal notice that your ERC claim has been fully denied. Letter 106-C means your claim has been partially denied.
Both letters share one critical feature: they start a two-year countdown from the date printed on the letter. Once that deadline expires, the IRS may be legally barred from paying your claim, even if it later concludes the denial was incorrect.
The IRS has stated that taxpayers who fail to file suit within the two-year period, or fail to execute a valid extension agreement, may permanently lose the right to receive the refund.
There is no grace period. There is no automatic extension. Filing a protest with the IRS Independent Office of Appeals preserves administrative rights, but it does not stop the two-year clock.
This distinction has already caused businesses to lose otherwise valid ERC claims while waiting for the IRS to process an appeal.
How the IRS Got Here: The Reverse Audit Problem
The traditional IRS audit process follows a predictable sequence: examination, documentation requests, review, and then a determination.
ERC disallowances often worked in reverse.
The IRS denied first. Then it requested documentation afterward.
The National Taxpayer Advocate’s 2024 Annual Report to Congress identified ERC processing issues as one of the most serious taxpayer problems facing the agency. The report described how thousands of ERC claims were denied after being run through a risk-scoring model before individualized review occurred.
That means some businesses received denial letters based on algorithmic characteristics rather than a detailed review of their specific facts.
For legitimate businesses that qualified under the law, correcting those errors requires action within the two-year deadline.
Who Receives ERC Disallowance Letters?
The IRS risk-scoring system evaluated claims using statistical indicators associated with high-risk filings. As a result, some legitimately eligible businesses received denial letters despite meeting ERC requirements.
Common examples include:
- Businesses that used high-volume ERC filing firms
- Businesses operating in industries the IRS classified as higher risk
- Claims falling within statistical ranges flagged by the IRS model
- Businesses relying on government-order suspension eligibility
If your company experienced COVID-19 government restrictions or qualifying gross receipt declines, your eligibility may still be valid even if the IRS issued a disallowance letter.
The denial letter reflects the IRS’s initial determination, not necessarily the final outcome.
The Two-Year Deadline: What You Need to Know
| Action | Deadline | Effect |
|---|---|---|
| Respond to Letter 105-C or 106-C | 30 Days | Preserves appeal rights |
| File Protest | Within Protest Window | Does not stop 2-year clock |
| Request Form 907 Extension | Before Deadline | Extends time to file suit |
| File Refund Suit | Within 2 Years | Preserves refund rights |
On April 27, 2026, the IRS announced a streamlined extension process for taxpayers who already responded to a disallowance notice and have six months or less remaining before the deadline expires.
Businesses approaching the deadline should consult a tax attorney immediately to determine whether a Form 907 extension, administrative strategy, or refund lawsuit is necessary.
What Happens After Filing a Protest?
After a protest is submitted, the IRS generally routes ERC cases through Compliance rather than directly to Appeals.
That means the IRS conducts a documentation review after issuing the denial. Many cases remain in compliance review for months or years before reaching an Appeals Officer.
While that process unfolds, the two-year statutory deadline continues running.
This is one reason professional representation can be critical. A properly documented protest may help move a case more efficiently through the review process while preserving future litigation options.
Businesses dealing with ERC disputes often face related tax issues as well. Learn more about IRS audits and IRS appeals.
If the IRS Does Not Reverse the Denial
If the administrative process does not resolve your claim, two paths generally remain:
- Refund litigation in U.S. District Court or the U.S. Court of Federal Claims
- Extension of the filing deadline through Form 907 when available
Refund litigation allows a taxpayer to challenge the denial before a federal judge. Businesses that developed a strong administrative record typically enter litigation in a stronger position than businesses that submitted incomplete protests.
The earlier eligibility documentation is assembled, the stronger the potential legal position becomes.
How Cumberland Law Group Helps Businesses Fight ERC Disallowances
ERC disallowance defense involves multiple areas of tax law, including the CARES Act, IRS administrative procedure, statute-of-limitations rules, and federal refund litigation.
Cumberland Law Group assists businesses with:
- Reviewing ERC disallowance letters
- Evaluating eligibility and substantiation
- Preparing formal protests for Letters 105-C and 106-C
- Monitoring statutory deadlines
- Negotiating Form 907 extensions
- Pursuing refund litigation when necessary
For business owners evaluating legal representation, see our guide on Tax Attorney vs. CPA and learn more about the attorneys handling these matters on our Tax Attorney Team page.
Schedule Your Free Consultation
The two-year deadline is not theoretical. For many businesses, it is approaching quickly.
Cumberland Law Group offers free consultations for businesses that received ERC disallowance letters, businesses currently in the protest process, and businesses evaluating litigation options.
Once the two-year period expires, no attorney, no appeal, and no IRS agreement can restore your right to that refund.
Call (800) 960-5359 or contact Cumberland Law Group online to schedule your free consultation.
This page is for informational purposes only and does not constitute legal advice.