A denied ERC claim is not the end of the claim. Most denials can still be contested — through a protest with IRS Appeals, or through a refund lawsuit in federal court — but a clock is running, and the company that filed your claim has probably already told you they will not fight it. Here is what the denial actually means and what you can still do.
By Sam Brotman, JD, LLM, MBA · Last updated August 2026
What does Letter 105-C mean?
Letter 105-C is the IRS’s formal notice that your claim has been fully disallowed — and it starts a two-year deadline to sue.
Letter 105-C (Notice of Claim Disallowance): the IRS’s written denial of a refund claim, including an ERC claim filed on Form 941-X. Under IRC § 6532(a)(1), you have two years from the date of that letter to file a refund suit. A partial denial arrives as Letter 106-C and works the same way for the disallowed portion.
Two things about that deadline that surprise people. First, writing back to the IRS does not stop it — a protest or a request for reconsideration does not extend the two years unless the IRS signs a Form 907 agreement extending it. Second, silence does not stop it either. If you protested your denial and nobody answered — a common experience right now — the clock has been running the whole time.
How common is this? See the numbers: inside a live ERC docket — 273 open matters, $85.4M in claims.
Can I appeal an ERC denial without going to court?
Yes. You can file a written protest and ask for review by the IRS Independent Office of Appeals — but it does not pause the two-year lawsuit deadline.
The denial letter gives you a window to request Appeals consideration, and for some claims that is the right first move: it is cheaper than litigation and some cases resolve there. The problem is volume. Appeals is working through an enormous backlog of ERC cases, and a protest can sit for a year or more without a hearing. If the two-year window under § 6532 runs out while you wait, the strongest tool you have is gone. The practical answer for most denied claims of any size: protest if the timeline allows, but calendar the lawsuit deadline on day one and file suit before it passes.
Can I sue the IRS over a denied ERC claim?
Yes. A denied refund claim can be litigated under IRC § 7422 in federal district court or the Court of Federal Claims.
A refund suit is not a shouting match with the IRS — it moves the dispute out of the agency entirely and puts it in front of a judge, with the Department of Justice on the other side. The government answers the complaint, there is a fact discovery period, and the great majority of these cases resolve by settlement before anyone sees a courtroom. Brotman Law litigates ERC refund suits in federal courts across the country, with $160M+ in ERC claims handled. For how these cases actually unfold — timeline, discovery, settlement posture — see our ERC litigation attorney page.
Do I qualify if my revenue dropped? The gross receipts test
A large enough decline in gross receipts qualifies you for the ERC by arithmetic alone — no government-order argument required.
This is the cleanest eligibility path, because it is a math test, not a debate about how COVID affected your operations:
| Claim year | Test | What qualifies |
|---|---|---|
| 2020 quarters | Compare to the same quarter of 2019 | Gross receipts below 50% of the 2019 quarter |
| 2021 quarters (Q1–Q3) | Compare to the same quarter of 2019 | Gross receipts below 80% of the 2019 quarter (a decline of more than 20%) |
The catch is aggregation. Under IRC §§ 52(a)–(b) and 414(m)–(o), companies under common ownership are treated as a single employer, and the decline is measured across the whole group. One company down 60% while four sister companies stayed flat may or may not clear the threshold once the numbers are combined — that is the first thing we test in due diligence, quarter by quarter, from the actual financial statements. It is also where denials get beaten: the IRS frequently denies claims without ever doing this arithmetic correctly.
The company that filed my ERC will not help. Now what?
Most ERC filing companies do not defend denials — their engagement ended when the claim was filed.
If your claim came through one of the high-volume ERC firms, read your agreement: almost none of them include audit or denial defense, and most will tell you directly that a denial is the end of the road. It is not. What you need from them is your file — everything you gave them and everything they filed. From there, a denied claim is a legal matter: eligibility, documentation, deadlines, and if necessary a complaint in federal court.
What does it cost to fight a denial?
We handle ERC denial cases hourly or on contingency — and on a valid claim, overpayment interest keeps accruing while the case is pending.
Most clients choose contingency: a percentage of what is actually recovered, so the analysis of whether your case is worth bringing is one we both have to believe in. And the math has a feature people miss: a refund claim earns overpayment interest from the time it was filed. If you win or settle, the recovery includes that interest — on claims that have been pending for two or three years, it is substantial. We tell you honestly in due diligence whether the numbers work. If they do not, you find that out from your own counsel in a week — not from a judge in a year.
What to do this week
Find the denial letter and check its date — that date runs the § 6532 clock. Pull together the claim file (the Form 941-X filings and whatever the filing company gave you) and quarterly financial statements from 2019 through 2021 for every company under common ownership. That is the whole due diligence package: with those documents we can tell you within days whether the claim is worth fighting and how.
Tell us what is going on
Short version is fine. We read every one of these, and you will hear back from a person.
If you would rather talk it through, book a free 15-minute call or call us at (619) 378-3138. Background reading: how ERC disallowance works · Letter 105-C explained · the ERC hub.