If you used a third-party ERC provider under a contingency fee agreement, you’re not alone. Thousands of businesses turned to outside help to claim the Employee Retention Credit (ERC)—especially during the rush of 2021–2022. These providers typically promised no upfront cost, instead taking a percentage of the ERC refund once it was received.
Now that the IRS has slowed processing, denied many claims, and raised the stakes through audits and clawback actions, you may be wondering:
What are my options if my ERC refund is delayed—and I used a contingency-based provider?
This article outlines what to consider before pursuing a refund claim through litigation, especially when a third party filed on your behalf. It also explains why reviewing your contract—carefully and legally—is a crucial first step.
What Litigation Can Offer—Even If a Third Party Filed Your ERC Claim
Many businesses who used contingency-based providers now face one of three problems:
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Their ERC refund is delayed by more than six months
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The IRS denied or flagged the claim
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They are unsure whether the claim was filed properly
In these situations, litigation can provide a path to resolution that the IRS alone may not offer.
1. Litigation Creates Finality
A refund lawsuit can lead to a court judgment or settlement that the IRS cannot later revisit. This protects your refund from future clawbacks or denials based on the same facts—even if you didn’t handle the filing personally.
2. Litigation Is Independent of the Provider’s Filing
When you sue, it’s your case, your evidence, and your outcome. This is critical if you weren’t involved in preparing the original claim, or if documentation is incomplete or unclear.
The Importance of Reviewing Your ERC Contingency Agreement
Many contingency fee agreements cover ERC filing, but not litigation. That means:
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You may not be obligated to use the same provider in court
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A court-ordered refund might not trigger a fee under the original terms
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The provider may not have rights to future payments, depending on the language
However, every contract is different. A legal review can help clarify your options and protect you from unintended consequences.
What an Attorney Can Help You Understand:
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Does your agreement cover refund litigation?
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Are you required to involve or notify the provider?
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Is there a secondary fee clause if you take legal action?
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What are the risks and remedies if there’s a dispute?
This isn’t about challenging your provider—it’s about knowing your rights before you proceed.
Why Finality Matters: The Risk of IRS Clawbacks and Disallowance
Even if your ERC provider did everything right, the IRS is:
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Auditing ERC claims retroactively
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Disallowing claims without full review
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Issuing clawback notices to reclaim refunds
Litigation offers closure. Once a court decides or a settlement is signed, your claim is resolved—and the IRS can’t come back for more.
Can Litigation Reduce or Replace Your Contingency Fee?
It depends on your contract. If the agreement doesn’t cover litigation:
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You may not owe a fee on a refund awarded through court
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You may be able to work with a new attorney on separate terms
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You should still understand any residual obligations
Reviewing your agreement is the best way to avoid confusion and prevent future disputes.
Proceed Carefully, But Confidently
If your refund is stuck, denied, or uncertain, litigation may be the right next step—but only with full awareness of your contractual obligations. Before filing:
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Request and review your contingency agreement
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Speak to a tax litigation attorney
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Document your communications with your provider
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Make informed, strategic decisions—not reactive ones
Conclusion: Know What You Signed, Know What You Can Do
ERC litigation can resolve long-delayed claims and give your business financial certainty. If you used a third-party ERC provider on contingency, that path is still open—but it must start with a clear understanding of your agreement.
Before you file suit or make assumptions, consult a professional. Know your rights. Then move forward with confidence.
This article is for educational purposes only and does not constitute legal advice. Consult with an attorney before taking any action related to ERC claims or third-party agreements.
Learn More About the Litigation Process
Want to understand the steps involved in suing the IRS for your ERC refund? Read our in-depth guide on The ERC Litigation Process: What to Expect When Suing the IRS to get a clearer picture of how legal action can help you secure your refund faster.
Contact us today to schedule a consultation and take the first step toward recovering your ERC refund.