What Business Owners Need to Know About Challenging Denied ERC Claims in 2026

Businesses that have had their Employee Retention Credit (ERC) claims denied by the Internal Revenue Service (IRS) have various options for seeking the refunds they are owed. One of these options is to file a refund lawsuit in federal court. However, this is generally a last resort, and in most cases, it will be beneficial for businesses to first seek to resolve their disputed claims with the IRS or through its Independent Office of Appeals.

While businesses generally have 2 years to file a refund lawsuit in federal court, the IRS recently opened an option for businesses to extend the time they have to file. In doing so, the IRS is seeking to avoid overburdening the courts while continuing to resolve disputed claims through administrative means. Learn more from Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

IRS Offers “New, Streamlined Way” to Preserve Ability to Challenge ERC Claim Denials

On April 27, 2026, the IRS announced, “a new, streamlined way for taxpayers to extend the period of time for the IRS and the IRS Independent Office of Appeals to review a taxpayer’s response to a disallowance of an Employee Retention Credit (ERC) claim [and] avoid refund litigation.” The key features of this new option are as follows:

• The business must have a disputed ERC claim that the IRS has disallowed by issuing Letter 105-C or 106-C;
• The business must have six months or less remaining to file a refund lawsuit in federal court; and,
• The business must be waiting for the IRS to consider its response to Letter 105-C or 106-C.

If a business meets these three requirements, it can file IRS Form 907 (Agreement to Extend the Time to Bring Suit). If the IRS accepts and countersigns a business’s submitted Form 907, the business will then have until the date specified on the form to pursue formal legal action against the IRS. However, the IRS’ goal is to avoid litigation, and it expects to resolve disputed ERC claims administratively in most cases—it just needs more time to do so.

The IRS is Sending Letters to Eligible Businesses, But Receipt of a Letter is Not Required to File

While the IRS is sending letters to businesses that may be eligible to file Form 907, its announcement clarifies that businesses may be eligible to file even without a letter. If you are unsure whether your business can (and should) file Form 907, an experienced Virginia tax attorney at Thorn Law Group can help.

Schedule a Confidential Consultation with Virginia Tax Attorney Kevin E. Thorn Today

If you have questions about how to handle your business’s disputed ERC claim (or claims) in 2026, we encourage you to contact us for more information. To schedule a confidential consultation with Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call us at 703-752-3752 or contact us confidentially online today.