ERC Update: More Time For Appeals to be Filed
By Jeffrey M. Glassman on September 20, 2024
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Jeffrey M. Glassman
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On September 19, 2024, the IRS published a page to its website (link) with new and potentially helpful information about Employee Retention Credit (ERC) denial letters. The page is titled “Understanding Letter 105-C, Disallowance of the Employee Retention Credit,” but there is more to the IRS update than simply understanding a denial letter.
The IRS website now provides that employers may have two years to request an administrative appeal following an ERC denial letter. This is potentially welcome news to employers who may have previously understood that they had no more than 30 days to request an administrative appeal. (Due to confusing language in certain denial letters, some employers may not have even been aware that they could request an administrative appeal but that is a topic for another discussion.)
To be clear, requesting an administrative appeal does not extend the period of time to file a refund lawsuit. Therefore, the welcome news must be considered in light of the two-year limits for filing a refund lawsuit. The IRS Office of Appeals has also confirmed that the two-year limit also prevents the IRS from issuing a refund beyond two years following an ERC denial letter. If a taxpayer fails to file a refund lawsuit within two years of a denial letter, they may have surrendered their avenues for legal recourse. There may be ways to get more time, but those decisions must be considered carefully. Not every document purporting to extend time limits may in fact extend the time limits. Taxpayers should seek reputable counsel before deciding how to proceed—there are numerous potential foot faults that should not be ignored.
And taxpayers who can request an appeal within the normal 30-day period should still consider filing within that timeline. Importantly, the IRS update does not guarantee that an appeal will be accepted. While I do not immediately see a reason why the IRS would not grant an ERC appeal filed within the two-year period, the lack of guarantee is still a relevant data point.
All in all, this is a good sign that the IRS is allowing taxpayers (and likely overextended Appeals Officers) more time to make decisions surrounding a constantly evolving area of the tax law.
If you have any questions about this article, any other ERC matter, or any civil or criminal tax matter, please contact me at jglassman@meadowscollier.com or (214) 749-2417.
The IRS website now provides that employers may have two years to request an administrative appeal following an ERC denial letter. This is potentially welcome news to employers who may have previously understood that they had no more than 30 days to request an administrative appeal. (Due to confusing language in certain denial letters, some employers may not have even been aware that they could request an administrative appeal but that is a topic for another discussion.)
To be clear, requesting an administrative appeal does not extend the period of time to file a refund lawsuit. Therefore, the welcome news must be considered in light of the two-year limits for filing a refund lawsuit. The IRS Office of Appeals has also confirmed that the two-year limit also prevents the IRS from issuing a refund beyond two years following an ERC denial letter. If a taxpayer fails to file a refund lawsuit within two years of a denial letter, they may have surrendered their avenues for legal recourse. There may be ways to get more time, but those decisions must be considered carefully. Not every document purporting to extend time limits may in fact extend the time limits. Taxpayers should seek reputable counsel before deciding how to proceed—there are numerous potential foot faults that should not be ignored.
And taxpayers who can request an appeal within the normal 30-day period should still consider filing within that timeline. Importantly, the IRS update does not guarantee that an appeal will be accepted. While I do not immediately see a reason why the IRS would not grant an ERC appeal filed within the two-year period, the lack of guarantee is still a relevant data point.
All in all, this is a good sign that the IRS is allowing taxpayers (and likely overextended Appeals Officers) more time to make decisions surrounding a constantly evolving area of the tax law.
If you have any questions about this article, any other ERC matter, or any civil or criminal tax matter, please contact me at jglassman@meadowscollier.com or (214) 749-2417.
