IRS Resets the ERC Clock: Form 907 and the Six-Month Decision

On April 27, 2026 the IRS rolled out a streamlined way to buy time on a disallowed Employee Retention Credit claim using Form 907, the Agreement to Extend the Time to Bring Suit. The short version is this. When the IRS disallows an ERC claim by sending Letter 105.C or Letter 106.C, you get two years from the date of that letter to either resolve the matter administratively or file a refund suit in federal court. That two.year period comes from Internal Revenue Code Section 6532(a). Filing a protest with the IRS Independent Office of Appeals does not pause that clock. Form 907, once signed by both you and the IRS, extends the deadline to bring suit so your claim does not die purely because IRS review outlasted the statute.

The mechanics matter. Roughly six months before your two.year window closes, the IRS sends a CP320B notice. That notice is the trigger. It tells you the deadline is approaching and points you to Form 907. You then have a narrow window to make one of three moves. Sign and upload Form 907 to extend the suit deadline. File a refund suit in U.S. District Court or the U.S. Court of Federal Claims. Or do nothing and lose the right to sue when the clock runs out. The extension is not valid until the IRS countersigns, so an upload alone is not the finish line.

Here is a worked example. A Manhattan restaurant group filed an ERC claim on a Form 941.X amended payroll return for 2021. The IRS disallowed it with a Letter 105.C dated June 12, 2024. That set the two.year suit deadline at June 12, 2026. The group filed an Appeals protest in late 2024 and assumed the protest froze the clock. It did not. In December 2025 a CP320B arrived warning that the suit window closed in June 2026. The group signed Form 907, uploaded it through the IRS Document Upload Tool, the IRS countersigned, and the deadline moved out twelve months. Their claim stayed alive in administrative review instead of forcing a rushed lawsuit.

The common mistake is believing an Appeals protest or ongoing IRS review stops the two.year statute. It does not. Many taxpayers sat on a disallowance letter assuming someone at the IRS was handling it, only to learn the suit deadline had nearly expired. Read the date on your Letter 105.C or 106.C and add exactly two years. That date is your hard deadline unless a signed and countersigned Form 907 moves it. A related error is confusing the dates on different correspondence. The two.year clock runs from the original Letter 105.C or 106.C, not from a later CP320B reminder or from the date you filed a protest, so always measure from the disallowance letter itself.

An edge case. If you never responded to the disallowance at all, the streamlined Form 907 route may not apply, because the relief is aimed at taxpayers who already responded and are waiting on the IRS. In that situation you are closer to a pure file.or.lose.it decision and should get the claim reviewed quickly. The IRS describes the new option in its April 2026 announcement, the statute sits at Section 6532, and the disallowance letter itself is explained at the IRS page on Letter 105.C.

If your ERC claim was disallowed and you are not sure where your two.year clock stands, we can pin down the exact date and the right move. The Reed Corporation handles disallowed ERC matters through IRS audit, refund and notice assistance and our tax compliance team. Start at our new client inquiry page.

You qualify for the streamlined Form 907 extension only if two conditions both hold. First, you are still waiting for the IRS to consider your response to a notice of disallowance issued on Letter 105.C or Letter 106.C. Second, you have six months or less remaining before your two.year window to file a refund suit closes. The IRS set both conditions in its April 2026 announcement, and the narrow timing is the reason the six.month clock matters. Miss either condition and the streamlined path may not be open to you, though other options can still exist.

Walk through the mechanics of each condition. The first condition assumes you actually responded to the disallowance. That usually means you sent a written disagreement or filed a protest with the IRS Independent Office of Appeals after the Letter 105.C or 106.C arrived, and the IRS has not finished considering it. If you never responded, you generally fall outside the streamlined relief. The second condition is purely arithmetic. Take the date on the disallowance letter, add two years, and measure how much time is left. If that remaining time is six months or less, you are inside the window the CP320B notice is designed to flag.

Here is a worked example. A Brooklyn logistics company filed a Form 941.X claiming ERC for three quarters of 2021. The IRS disallowed it with a Letter 106.C dated September 30, 2024, making the suit deadline September 30, 2026. The company filed a timely protest in November 2024, so the first condition was met, the IRS was still reviewing the response. In April 2026, with under six months left on the clock, a CP320B arrived. Both conditions were satisfied. The company qualified, signed Form 907, and extended the deadline. Compare a second business that got the same disallowance date but never responded. That second business did not meet the first condition and had to decide between filing suit and walking away.

The common mistake is assuming that filing a protest by itself qualifies you regardless of timing. The protest satisfies the first condition, but if you still have, say, fourteen months left on the two.year clock, you are not yet inside the six.month window and the streamlined upload route under CP320B is not triggered. You wait, watch the calendar, and act when the window opens. The other common mistake is the reverse, waiting so long that the clock expires before you ever respond, which closes both the suit and the streamlined extension. A third version of this error is assuming the IRS will always mail the CP320B on time. The notice is a help, not a guarantee, and the burden of meeting the deadline stays with you even if the reminder never arrives.

An edge case. If your two.year deadline already passed, neither Form 907 nor a refund suit can revive the claim, because the agreement must be signed before the period expires and the suit must be filed before it expires. Another edge case involves representatives. If a power of attorney is on file, the IRS guidance and the CP320B can route through your representative, which changes who receives the notice and who acts. If you fall outside the streamlined facts, do not assume you are out of moves entirely, review the options with a professional. The IRS lays out the qualifying conditions in its announcement and on the CP320B notice page, and the Letter 106.C side is explained at the IRS page on Letter 106.C.

If you are not sure whether you meet both conditions, we will check the disallowance date, confirm whether your response is still pending, and tell you if the window is open. The Reed Corporation works these through IRS audit, refund and notice assistance and our tax compliance practice. Begin at our new client inquiry page.

Submit Form 907 through the IRS Document Upload Tool by going to IRS.gov/DUTReply and selecting notice CP320B from the drop.down menu. That is the channel the IRS specified in its April 2026 announcement. You do not mail the form by certified post and you do not fax it to a general number. You upload the signed agreement through the tool tied to your CP320B notice. One point that trips people up. The form only takes legal effect once both you and the IRS sign it, so uploading is not the same as approval. The extension is valid only after the IRS countersigns.

The operative deadline is your own two.year period running from the date of the Letter 105.C or Letter 106.C disallowance, under Section 6532(a). Form 907 must be signed by both parties before that two.year period expires, and a refund suit, if you go that route instead, must be filed before the same date. The whole purpose of the six.month CP320B trigger is to push you to act before the window narrows past the point of recovery. Practically, that means you upload your signed agreement well ahead of the expiration date, not in the final days, because the IRS needs time to process the upload and apply its countersignature.

Here is a worked example with real dates. A Queens manufacturing firm received a Letter 105.C dated March 3, 2024, setting a suit deadline of March 3, 2026. A CP320B arrived in October 2025. The firm signed Form 907 and uploaded it through the Document Upload Tool under CP320B on November 10, 2025, nearly four months before the deadline. The IRS countersigned in December 2025 and the deadline moved to March 3, 2027. Because the firm uploaded early, the countersignature landed comfortably inside the original window. A second firm that waited until late February 2026 to upload risked the IRS not countersigning before March 3, which would have left the claim exposed.

The common mistake is treating the upload as the finish line and stopping there. An uploaded but uncountersigned Form 907 does not extend anything. Save the dated upload confirmation, then watch for the IRS countersignature, and if it has not come and the deadline is approaching, follow up or prepare to file suit as a backstop. The second mistake is uploading in the last few days before expiration, which leaves no room for processing time and can blow the deadline despite your good.faith effort. A third pitfall is uploading the form under the wrong notice selection in the tool. Choose the CP320B option specifically, because routing the agreement to the wrong queue can delay the IRS countersignature past the date you needed it.

An edge case. If you never received a CP320B but believe you qualify, you can still pursue the extension proactively rather than waiting for the notice. Reach out through the contact information on your original disallowance letter or through a representative with a power of attorney on file. A second edge case involves multiple quarters. If your ERC claim spanned several quarters disallowed on different dates, each may carry its own two.year clock, and you may need to track and extend more than one deadline. The IRS describes the upload process in its announcement and on the Document Upload Tool page, and Form 907 itself is posted at the IRS Form 907 PDF.

If you want the upload handled correctly and the countersignature tracked so nothing slips, we can run it. The Reed Corporation manages disallowed ERC deadlines through IRS audit, refund and notice assistance and our tax compliance team. Start at our new client inquiry page.

Before April 2026, a taxpayer waiting on the IRS to act on a disallowance response had no clean administrative way to extend the two.year suit deadline. The clock under Section 6532(a) simply ran, and involvement with the IRS Independent Office of Appeals did not stop it. If the IRS review outlasted the statute, the claim could become time.barred even though the taxpayer had done everything asked. The April 2026 change gives a defined, streamlined path. The IRS now affirmatively warns affected taxpayers with the CP320B notice and accepts a signed Form 907 through the Document Upload Tool to push the deadline out.

The mechanics of what changed come down to three things. First, notice. The IRS now sends CP320B roughly six months before the deadline, so the taxpayer is told the clock is running rather than discovering it too late. Second, channel. Form 907 goes through the IRS.gov/DUTReply upload tool under the CP320B selection, a defined route rather than ad hoc correspondence. Third, posture. The extension preserves the administrative path, so a taxpayer mid.appeal does not have to abandon that process and rush into court just to protect the suit deadline. What did not change is the substance. ERC eligibility and the underlying disallowance are untouched. Form 907 preserves your right to litigate or settle, it does not decide the merits.

Here is a worked example contrasting old and new. In 2023, a Bronx contractor with a disallowed ERC claim and a pending Appeals protest watched the two.year clock approach with no administrative way to extend it. To protect the deadline, the contractor would have had to file a refund suit in the middle of the appeal, surrendering months of negotiating posture, or risk losing the right to sue entirely. Under the post.April 2026 process, that same contractor receives a CP320B, signs Form 907, uploads it, and the IRS countersigns, moving the deadline out twelve months. The appeal continues. No premature lawsuit. The 200,000 dollar claim stays alive without litigation cost.

The common mistake under the old understanding was assuming Appeals froze the statute. It never did, and that misunderstanding cost taxpayers their suit rights. The new process does not erase that rule, it gives you a tool to extend the deadline so the rule stops being a trap. A second mistake now is assuming the change revives expired claims. It does not. If your two.year window already closed, the new option cannot bring it back, because the agreement still has to be signed before expiration. A further misread is treating the extension as a sign the IRS has softened its view of your claim. It has not. The countersignature only moves a procedural deadline and says nothing about whether the agency will allow the credit.

An edge case. The change is partly a response to the disallowance backlog that the National Taxpayer Advocate flagged as a serious problem. That context matters because it signals the IRS expects many claims to need extensions, so do not assume your case is unusual or that the notice is a mistake. A second edge case involves taxpayers who already engaged litigation counsel. For them, the change alters timeline strategy rather than handing a free benefit, and signing Form 907 is a substantive act that counsel should weigh against filing strategy. The IRS explains the new procedure in its announcement and the CP320B notice page, and the Taxpayer Advocate Service covers it on its ERC claim blog.

If you want to know how the change affects your specific claim, including whether to extend or proceed to court, we can map it. The Reed Corporation handles this through IRS audit, refund and notice assistance and our tax compliance practice. Begin at our new client inquiry page.

The first thing to do is pull your Letter 105.C or Letter 106.C and calculate the exact two.year deadline from the date printed on that letter. That date, under Section 6532(a), is your hard deadline to either resolve the claim administratively or file a refund suit. Everything else flows from it. If you already responded to the disallowance and have six months or less remaining, prepare Form 907 and upload it under CP320B through the IRS Document Upload Tool before the window closes. Do not assume an Appeals protest bought you time, because it did not stop the clock.

The mechanics of acting now break into a short sequence. Find the disallowance letter and read the date. Add two years to get the deadline. Confirm whether you already responded to the disallowance, since that determines whether the streamlined route applies. Check whether a CP320B has arrived, and if your deadline is within six months and no notice has come, do not wait, pursue the extension proactively through the contact information on the letter or your representative. Keep copies of everything, including the dated upload confirmation, and track the IRS countersignature that makes the extension effective.

Here is a worked example. A Long Island City retailer found a Letter 105.C dated July 1, 2024 buried in a stack of mail, setting a deadline of July 1, 2026. The retailer had filed a protest in 2024, so the streamlined route was available. In early 2026, with the deadline under six months out, the owner pulled the claim file, confirmed the Form 941.X support, signed Form 907, and uploaded it under CP320B on February 5, 2026. The IRS countersigned in March, moving the deadline to July 1, 2027. The 175,000 dollar claim stayed in administrative review. Had the owner left the letter in the pile another four months, the suit window could have closed for good.

The common mistake is letting the disallowance letter sit while you wait to hear from a CPA who is also waiting. That passive posture is exactly how taxpayers lose suit rights. The clock does not pause for anyone. A second mistake is signing Form 907 without first looking hard at whether the claim is worth keeping. If the claim was thin from the start, and many ERC mill claims were, extending may just delay an inevitable loss while you spend more on professional fees. Decide whether the substance is strong before you extend. A third mistake is letting one quarter drive the decision for all of them. If your claim covered several quarters that the IRS handled separately, weigh each on its own facts, because the right move on a strong quarter can differ from the right move on a weak one.

An edge case. If the disallowance itself looks wrong, because you had a genuine partial suspension under a government order or a documented gross.receipts decline, the math is tight, get the claim file and the litigation option reviewed before the clock expires, since extending preserves a path worth pursuing. A second edge case involves state credits. New York and some other states tied wage credits to the federal ERC determination, so a federal disallowance can expose a state claim, and that exposure should be reviewed alongside the federal deadline. The IRS frames the immediate steps in its announcement and the CP320B page, and Form 907 is posted at the IRS Form 907 PDF.

If your ERC claim was disallowed and the deadline is approaching, we will calculate the exact date, review whether the claim is worth defending, and handle the Form 907 upload. The Reed Corporation manages disallowed ERC claims through tax compliance and IRS audit, refund and notice assistance. Start at our new client inquiry page.