Receiving a Notice of Claim Disallowance from the IRS, also known as Letter 105-C, can be concerning for any business, especially when it pertains to your Employee Retention Credit (ERC) claim. This letter signifies that the IRS has decided to deny your ERC refund claim, but it’s not the end of the road. Understanding your rights and options is crucial for successfully disputing the disallowance and potentially recovering the tax credit your business deserves.
Understanding the Employee Retention Credit (ERC)
The ERC was introduced as part of the COVID-19 relief measures to help businesses retain their employees during the pandemic. It’s a refundable tax credit available to businesses that continued paying employees while facing significant declines in gross receipts or full or partial suspension of operations due to government orders limiting commerce, travel, or group meetings. For detailed information on ERC eligibility, refer to the IRS ERC Eligibility Checklist.
Why Was My ERC Claim Disallowed?
The IRS has been actively working to identify and address potentially erroneous ERC claims. They are using a risk-scoring process to assess the validity of claims, and if your claim was flagged as high-risk, you may have received Letter 105-C.
What to Do If You Received Letter 105-C
- Don’t Panic: Take a moment to understand the situation and your options. It’s not uncommon for businesses to receive these notices, and there are steps you can take to dispute the disallowance.
- Review the Letter Carefully: Examine the notice thoroughly to identify the specific reason(s) the IRS provides for disallowing your claim. This will help you tailor your response and gather the necessary supporting documentation.
- Gather Strong Evidence: Compile all relevant documents that support your ERC claim. This may include payroll records, tax forms, government orders related to COVID-19 restrictions, and any other evidence that demonstrates your eligibility for the credit.
- Respond to the IRS: Draft a clear and concise written response to the IRS within 30 days of receiving the notice. Explain why you believe your claim is valid, addressing the specific reasons for disallowance mentioned in the letter. Attach all supporting documentation to your response.
- Consider an Appeal: If the IRS upholds the disallowance after reviewing your response, you have the right to appeal the decision to the IRS Independent Office of Appeals. This involves submitting a formal protest and potentially attending an Appeals conference.
- Seek Professional Guidance: Navigating the ERC claim process and potential appeals can be complex. Consider seeking assistance from a qualified tax professional, such as the experts at JS Morlu, who can guide you through the process, ensure all necessary documentation is in order, and represent your interests before the IRS.
Key Points to Remember
- Two-Year Timeline: You generally have two years from the date of the disallowance notice to file a lawsuit in a U.S. district court or the U.S. Court of Federal Claims if you disagree with the IRS decision.
- Appeals Process: The appeals process can be lengthy, so starting the process as soon as possible is important if you plan to appeal.
- New IRS Review Process: The IRS has implemented a new process for reviewing ERC claim disallowances, which involves an initial review by a Revenue Agent before the case is potentially forwarded to Appeals.
- Correcting Errors: If there are errors in the disallowance notice, the IRS intends to send letters to taxpayers recognizing these errors and reiterating their appeal rights.
How JS Morlu Can Help
At JS Morlu, we understand the complexities of the ERC program and the challenges businesses face when dealing with IRS disallowances. Our team of experienced tax professionals can provide comprehensive support throughout the process, including:
- Expert Analysis: We can help you assess the validity of your ERC claim and identify any potential issues or areas of concern.
- Documentation Assistance: We can guide you in gathering all necessary supporting documentation and ensure it is organized and presented in a clear and compelling manner.
- Appeals Representation: If an appeal is necessary, we can represent your interests before the IRS Independent Office of Appeals, advocating for your rights and ensuring your case is presented effectively.
- Tax Planning and Advice: Beyond the ERC, we can provide ongoing tax planning and advice to help your business navigate other tax-related challenges and optimize your financial outcomes.
Don’t Navigate This Alone
If you’ve received Letter 105-C or are facing any challenges with your ERC claim, don’t hesitate to contact JS Morlu. We’re here to provide expert guidance and support every step of the way. Our goal is to help you resolve your ERC disallowance and secure the tax relief your business is entitled to.
Additional Resources
- IRS Website: The IRS website provides information and updates on the ERC program, including guidance on eligibility and claim procedures.
- Tax Professionals: Consult a qualified tax advisor for personalized advice and assistance with your specific situation.
Remember, receiving Letter 105-C is not the end of the road. By understanding your rights, gathering strong evidence, and seeking professional help, you can effectively dispute the disallowance and potentially recover the ERC refund your business deserves.
