The IRS Acts on the ERC Two-Year Deadline—Is It Enough?

Last month, I wrote an article encouraging employers to secure tax litigation counsel sooner rather than later if they might need to file a lawsuit to obtain Employee Retention Credits ("ERCs"). That article can be found here. Part of my rationale was that the two-year period to file a lawsuit could be fast approaching for many employers—approximately 28,000 ERC claims were disallowed in the summer of 2024. Even if an employer is still working with (or trying to work with) IRS Appeals, once the two-year period expires, Appeals can no longer work on the case and the employer loses the ability to file an ERC refund lawsuit.

Fortunately, the IRS appears to have taken note of the problem. On April 23, 2026, the IRS published a new web page, "Understanding Your CP320B Notice," outlining a new approach to address the problem. Going forward, the IRS will send letters ("Notice CP320B") to employers who responded to a disallowance letter and whose cases have six months or less remaining on the two-year period.

According to the Taxpayer Advocate Service, which worked closely with the IRS on these issues:

These new notices alert taxpayers to the approaching deadline and direct them to complete a Form 907, Agreement to Extend the Time to Bring Suit. Once signed by both the taxpayer and the IRS, the form extends the time to file a refund suit or receive payment. The notice includes a QR code linking to a fillable Form 907 that the taxpayer can print, sign, and electronically submit via the IRS Document Upload Tool (DUT). Upon receipt, the IRS will review the form and confirm the taxpayer's case meets the specified criteria (i.e., the taxpayer responded to an ERC disallowance, and six months or less remain on the two-year statute). If the taxpayer meets these criteria, the IRS will execute the form and return a signed copy.

If corrections are required, or the taxpayer does not otherwise qualify (e.g., more than six months remain on the two-year statute), the IRS will send a Letter 3064C explaining how to perfect the Form 907 or why the taxpayer does not qualify.

The IRS plans to issue Notice CP320B on a rolling basis as it works through the backlog of ERC-related responses.

Although this marks progress, it may prove insufficient. Practitioners have voiced longstanding concerns about the IRS's lack of responsiveness in processing Form 907, and taxpayers are typically left without a direct point of contact when issues arise. Employers facing a fast-approaching two-year deadline should not rely solely on receiving a Notice CP320B—proactive steps, including engaging litigation counsel, remain essential.

If you have questions about any ERC issue, or other civil or criminal tax matter, please contact me at 214-749-2417 or jglassman@meadowscollier.com.