If the IRS sent you Letter 105-C disallowing your Employee Retention Credit claim — or you just received the newer Notice CP320B and can't find a plain-English explanation of it anywhere — this guide walks through what each notice means, the deadlines they carry, and the decision you actually have to make: appeal, file a refund suit, or accept the disallowance. One warning up front: the most dangerous deadline in this process keeps running even while you're fighting.
Step 0 — First check whether your claim is legally alive (the OBBBA screen)
Before you spend a dollar or an hour on a protest, run this screen. Under §70605(d) of the One Big Beautiful Bill Act (effective July 4, 2025), if your disallowed ERC claim is for Q3 or Q4 of 2021 and it was filed after January 31, 2024, the refund is statutorily barred. Per the IRS's own ERC FAQ (updated effective July 4, 2025), no protest letter, Appeals conference, or refund suit revives a claim in that category — the law itself forecloses it. It's painful to hear, but knowing it up front is the difference between an informed decision and months of wasted effort (or thousands in professional fees) fighting a legally dead claim.
If your claim is for 2020 or Q1–Q2 2021, or it was filed on or before January 31, 2024, the screen passes — keep reading.
What Letter 105-C actually is (and how 106-C differs)
Letter 105-C is a formal claim disallowance — the IRS examined your refund claim and is denying it in full. Its sibling, Letter 106-C, is a partial disallowance: part of the claim is allowed, part denied. The IRS sent a wave of roughly 28,000 of these ERC disallowance letters starting in August 2024 (per the National Taxpayer Advocate's blog on the disallowance wave, August 2024). That date matters enormously, because of the clock those letters started.
The 2-year clock — and why an Appeals protest does NOT pause it
Under IRC §6532(a), you generally have 2 years from the date of the disallowance notice to file a refund suit in federal court. Here is the trap that catches people: filing a protest with IRS Appeals does not toll (pause) that 2-year clock. Appeals correspondence routinely takes a year or more. Businesses have sat in the Appeals queue, waited politely for an answer, and watched their right to sue expire in the meantime — losing by default without ever getting a decision.
- 📅 Do this today: find the date printed on your 105-C and calendar exactly two years out. That is your refund-suit window under §6532(a).
- ⚠️ The August 2024 wave expires August–October 2026. If your letter came in that wave, your window is closing now.
- 🚫 An Appeals protest does not extend it. Appeal if you have grounds — but track the suit deadline independently, in writing.
The 30-day protest window
Separately from the 2-year suit clock, your 105-C typically gives you 30 days to file a protest with IRS Appeals if you disagree. A protest that works addresses the specific denial reason stated in your letter. ERC denials generally rest on one of two theories — a government-order suspension that the IRS says doesn't qualify, or a gross-receipts decline the IRS says you didn't have — and the evidence package for each is completely different. A generic "we disagree" letter restating your original claim does not move Appeals.
Notice CP320B and the Form 907 extension — the actual 2026 mechanics
CP320B is the IRS notice (new as of April 2026) used in the Form 907 process — the mechanism for extending the §6532(a) refund-suit window by written agreement with the IRS. Because the notice is so new, almost nothing published explains where it fits. Here is the corrected sequence, because most summaries online get it wrong:
- Respond to your 105-C first. A filed response sitting with the IRS awaiting consideration is the entry gate — no response on file, no extension path.
- Wait for IRS consideration while independently tracking your 2-year clock.
- Eligibility trigger: you have a response on file and 6 months or less remain on your 2-year window.
- The IRS issues Notice CP320B, after which you submit the signed Form 907 via the Document Upload Tool at IRS.gov/DUTReply.
- Both signatures (yours and the IRS's) must be completed before your window expires. An unsigned or late 907 extends nothing.
Translation: responding to the letter is the ticket to the extension. If you ignored the 105-C and plan to "deal with it later," you are also forfeiting the Form 907 path.
Appeal vs. refund suit vs. accept — the honest decision
Many ERC disallowances were correct — especially promoter-filed claims built on aggressive government-order theories. The honest decision tree: run the OBBBA screen first; if the claim survives, match your evidence to the denial reason and decide whether a protest has substance; if the amounts justify it and the clock is short, a refund suit (or a Form 907 extension) preserves the right to fight. And know the hard hand-off points where DIY stops being appropriate: promoter under investigation, claims of $50,000+, or anything inaccurate in the original filing — those go to a tax attorney or CPA before you respond, because a protest letter locks in your position.
On cost: tax attorneys handling ERC disallowance work commonly quote $3,500–$8,000 per quarter. Below that: raw IRS pages. The gap in the middle — decoding your letter, calculating your exact deadlines, and packaging a protest addressed to your actual denial reason — is exactly the documentation-and-decision layer you can do yourself if you sequence it correctly.
If you're dealing with a different IRS notice — a proposed adjustment rather than a claim disallowance — see our guide to responding to an IRS CP2000 notice in the 30-day window; the notices look similar in the mailbox but carry completely different rights and clocks.
This article is general information, not legal or tax advice. Verify every deadline against the dates printed on your own notice.