If you filed a claim for the Employee Retention Credit (ERC) and still haven’t been paid, you are not alone. The ERC was designed to help businesses survive the financial impact of COVID‑19, but for many taxpayers, it has fallen short.

The IRS was overwhelmed by millions of ERC claims, creating massive backlogs. While billions of dollars in refunds were issued, total claims far exceeded expectations. This prompted the IRS to increase scrutiny of remaining submissions.

ERC processing delays and increased scrutiny

In September 2023, the IRS imposed a processing moratorium to stop reviewing new claims while it worked through the backlog. Processing resumed in August 2024, but only for claims submitted on or before January 31, 2024. Claims filed after that date were subject to disallowance rules.

During this period of heightened review, the IRS determined that a significant percentage of claims were high‑risk or improper. This was driven by widespread fraudulent filings and “bad actor” promoters encouraging businesses to claim credits they did not qualify for.

To address this, the IRS applied advanced analytics that resulted in automatic disallowance notices—primarily Letters 105‑C or 106‑C. These letters require taxpayers to prove eligibility and officially start a two‑year statute of limitations.

From the date of the first disallowance letter, taxpayers have two years to:

• Resolve the claim,
• File an appeal, or
• File a refund lawsuit if they disagree with the IRS decision.

Immediate risk for claims under audit or appeal

Approximately 41,000 ERC claims remain under audit or appeal. The IRS has recently announced that statutes of limitation will not be extended. If a claim is still unresolved at the two‑year mark—even if the taxpayer ultimately qualifies—the claim will die automatically.

If you have a disallowed ERC claim, you must act before the two‑year deadline.

Taxpayers may request an extension by submitting Form 907. If signed by the IRS, this extends:

• The IRS’s time to finalize the claim, and
• The taxpayer’s time to file a refund lawsuit.

The IRS has stated it will issue Notice CP32 to taxpayers who qualify for this extension. Those taxpayers may submit Form 907 using the IRS Document Upload Tool or by going to  IRS.gov/DUTReply, selecting notice “CP320B” from the dropdown menu.

Even if you do not receive a notice but believe you qualify, you may still be eligible to request an extension. Instructions are available at:

• IRS.gov/erc105c 
• IRS.gov/erc106c

Administratively closed ERC claims create a bigger problem

An estimated 1.3 million+ ERC claims were “administratively closed” on December 31, 2025—without payment, examination, appeal rights, or notification. These claims were not formally disallowed, meaning:

• No appeal process was triggered
• No statute‑of‑limitations protection was created
• The IRS simply stopped working on them to eliminate the backlog

As unfair as it is, many legitimate ERC claims were effectively ignored. If your claim was administratively closed and you never received a letter or notice, your options are limited—but doing nothing guarantees no payment.

What you can still do

If you believe your ERC claim was administratively closed, consider the following actions:

• Contact the Taxpayer Advocate Service (TAS): 877‑777‑4778
• File Form 911 (Request for TAS Assistance): Then, fax to 855‑828‑2723
• Attempt to file Form 907 using the IRS Document Upload Tool at IRS.gov/DUTReply, selecting notice “CP320B”
• For large claims, consult legal counsel about filing a refund lawsuit

There is no guarantee the IRS will reopen or act on administratively closed claims. However, if you take no action, the claim will remain closed permanently and no payment will ever be issued.

For more information, contact the service provider who prepared the ERC claim or contact Kelly A Chambers, CPA at Kchambers@sek.com.