Letter 105-C is the IRS formally denying your ERC claim — and it starts a two-year clock to sue for your refund under IRC § 6532. The trap: appealing inside the IRS does NOT pause that clock. Miss the date and the denial becomes final forever, no matter how strong the claim was. Calendar the letter date today; everything else is strategy.
The short version is that a disallowance letter converts your ERC claim from a waiting problem into a deadline problem. The IRS issued disallowances in waves through 2024–2026 — moratorium-era risk screens, OBBBA-barred Q3–Q4 2021 claims, and eligibility determinations of wildly varying quality. Whatever the reason on your letter, the response framework is the same.
What the letter actually does
Letter 105-C (full disallowance) or 106-C (partial) is the IRS’s formal claim denial. From its date, IRC § 6532(a) gives you two years to file a refund suit in federal district court or the Court of Federal Claims. The only way to extend it is Form 907, a written agreement the IRS must sign — not a phone call, not a pending appeal, not a promise from an agent.
The three paths, honestly compared
Appeals protest: free, often worthwhile on the merits — but it runs on the IRS’s timeline while your two-year clock keeps ticking. Form 907 extension: the insurance policy that makes a long Appeals process safe; request it early, because the IRS doesn’t volunteer it. Refund suit: the only move that takes the decision away from the agency that just denied you — and as we cover in the settlement advantage, most filed cases resolve by negotiation with DOJ Tax, not trial. The full decision framework is in administrative path vs. litigation.
If a PEO filed your claim
The letter likely went to the PEO, the two-year clock is running against the PEO’s claim, and in most cases only the PEO can sue. That makes getting documentation and cooperation from the PEO urgent — the demand list is in ERC refunds and PEOs.
What to do this week
Calendar the letter date plus two years, minus a safety margin. Pull your claim file together — the 941-X, the eligibility workpapers, whoever prepared them. Then decide the path with counsel: our ERC litigation practice handles disallowance responses through suit and settlement, and the refund tracker follows the deadlines that govern everyone. Book a free 15-minute call — bring the letter; the date on it is the first thing we’ll read.
Letter 105-C FAQ
Does appealing my ERC disallowance pause the two-year deadline?
No — and this is the trap that ends cases. An IRS Appeals protest does not stop the two-year clock under IRC § 6532. If Appeals is still considering your case as the deadline approaches, you either get Form 907 signed or you file suit to preserve the claim.
What is the difference between Letter 105-C and 106-C?
Letter 105-C is a full disallowance of your claim; Letter 106-C is a partial one — the IRS is paying some quarters or amounts and denying the rest. Both start the same two-year window for the disallowed portion, and both deserve the same calendar discipline.
Can the disallowance be wrong even if I got the letter?
Frequently. The 2024–2026 disallowance waves included batch determinations — OBBBA-barred claims, moratorium-era screens, and eligibility calls made without examining records. A wrong letter still starts a real deadline; the merits get decided in Appeals or court, not by ignoring the notice.