Letter 105-C: Your ERC Claim Was Fully Disallowed
By Forrest Baumhover, CFP®, EA · Last verified September 1, 2026
Letter 105-C tells a business the IRS is denying its entire Employee Retention Credit claim for a period — and starts a two-year clock, running from the date on the letter, to either sue in court or sign a written agreement extending that deadline — an appeal alone does not stop it — or lose the right to recover the credit at all.
If you got this letter
Got a Letter 105-C in the Mail?
Letter 105-C means the IRS looked at an Employee Retention Credit claim you filed and denied all of it for the period named on the letter. The IRS also uses Letter 105-C for credits other than the Employee Retention Credit; this page covers only an ERC disallowance, so if your letter concerns a different credit, follow the instructions in the letter. This is not a math correction and not a request for more paperwork — it is a full disallowance.
Two clocks start on the date printed on this letter, not the date you open it. The IRS page Understanding Letter 105-C asks that you dispute the denial within 30 days to help protect your options, but the deadline that actually ends your rights is two years: if you have not filed suit in a U.S. District Court or the U.S. Court of Federal Claims, or signed a written agreement extending the deadline, within two years of this letter's date, you lose your ability to receive a refund of that credit, even if your appeal is still pending or Appeals has already made a favorable decision.
As of 2026, one common reason on this letter is new: the IRS denies a claim for the third or fourth quarter of 2021 that you filed after January 31, 2024, under a law signed July 4, 2025. If that is the reason on your letter, payroll records alone will not change it. Your response must include proof you filed on or before January 31, 2024, such as a certified-mail receipt, and the IRS also asks for documentation of your eligibility for each quarter you dispute.
Do not let the 30-day window (IRS.gov) pass without at least starting a dispute, and mark the two-year date on a calendar the day this letter arrives. If that date is getting close and your dispute is still unresolved, see CP320B for the option to extend it in writing.
What the notice actually says
Letter 105-C states that the IRS is disallowing the Employee Retention Credit claimed for a specific period — either as a refund or as a reduction of tax reported on an employment tax return. It is a full disallowance: unlike its companion notice, Letter 106-C, which covers partial denials, 105-C means the IRS is allowing none of the ERC claimed for that period.
The letter states two deadlines. First, an informal one (IRS.gov): "We generally ask that you dispute the disallowance within 30 days to help protect your two-year timeline to request an appeal or file suit." Second, the real jurisdictional one: "Generally, you have two years from the date of Letter 105-C (your original claim disallowance) to file suit."
What actually triggered it
A full ERC disallowance can rest on several grounds — the business did not meet the eligibility criteria for the credit, the claim duplicated wages used for other credits, or documentation did not support the amount claimed. As of 2026, IRS.gov names an additional, purely procedural ground: the claim was filed too late. The page states it directly — "We can't allow your claim for Employee Retention Credit (ERC) because it was filed after Jan. 31, 2024," citing Public Law 119-21, §70605(d): "no credit or refund with respect to such credit will be allowed after July 4, 2025, for the last two quarters of 2021 unless the claim was filed on or before Jan. 31, 2024."
That filing-date ground is categorically different from a factual eligibility dispute. If your letter cites it, payroll documentation alone does not change the outcome — the claim's own filing date is what disqualified it, and any dispute has to address that date first; the IRS still asks for eligibility documentation in every response.
What Letter 105-C does not cover
Letter 105-C does not itself assess a penalty or start a collection action — it is a denial of a credit claim, not a bill. If you had already received the disallowed ERC as a refund, a separate process recovers that money; the letter's own deadlines govern the right to contest the disallowance, not any resulting balance due.
It also does not extend itself. Under IRC §6532(a), the two-year suit period keeps running whether or not you file an informal dispute within 30 days (IRS.gov), and whether or not an appeal is still open when the two years is up. The IRS states this without qualification: "By law, we can't issue a refund or allow a credit after the two-year period unless you file suit during that period." The only way to move that date is a signed Form 907 agreement, executed by both sides before the two years run out; CP320B explains how to file it.
What people mistake Letter 105-C for
The 30-day figure on this letter (IRS.gov) is easy to mistake for a hard deadline the way a CDP or Tax Court notice's response window works. It is not — the IRS page frames the 30 days as a request, so missing them does not by itself forfeit the right to appeal or sue. What it forfeits is time: an informal dispute filed late still has to fit inside the same two-year window, and starting late leaves less runway to actually resolve anything before that window closes.
Letter 105-C is also easy to conflate with Letter 106-C, its partial-disallowance counterpart, or with CP320B, a separate notice that only exists for taxpayers already disputing a 105-C or 106-C denial with six months or less left on the clock (the IRS page Understanding Letter 105-C). Receiving Letter 105-C does not mean CP320B is coming — it only arrives if the two-year deadline gets close while a dispute is still open.
Where this rule comes from
The two-year suit period is the deadline set by IRC §6532 for refund suits generally, applied here to a disallowed ERC claim exactly as the IRS's own Letter 105-C page states it. The new filing-date disallowance ground traces to §70605(d) of Public Law 119-21 (the law IRS.gov calls the Working Families Tax Cuts), which set January 31, 2024 as the cutoff for filing an ERC claim for the last two quarters of 2021 and barred allowance of any such claim filed after that date, effective July 4, 2025.
A taxpayer disputing this letter and approaching the two-year deadline without a resolution should not wait for the IRS to reach out. If you have already responded to the disallowance, are waiting on the IRS, and have six months or less left, IRS News Release IR-2026-58 says to upload a signed Form 907 through the Document Upload Tool (select notice CP320B); you do not need to have received CP320B. If Appeals has your case and you know your Appeals Officer, ask that officer for the extension instead. The extension is not valid until the IRS signs it.
Common Questions
What is the real deadline on Letter 105-C — 30 days or two years?
Both matter, but two years is the one that actually forfeits your rights. The IRS page Understanding Letter 105-C asks for a dispute within 30 days to help protect the two-year window, but the hard deadline to file suit — or sign an agreement extending it — is two years from the date on the letter.
Does the two-year clock pause while my appeal is pending?
No. The IRS states plainly that the two-year period runs out on its own even if Appeals has already made a favorable decision on the dispute. Only filing suit or signing a Form 907 extension before the deadline stops it.
My claim was denied because I filed after January 31, 2024 — can I dispute that?
You can dispute it, but the filing-date ground under WFTC §70605(d) is a factual, not discretionary, determination — if the claim genuinely was filed after that date for the affected quarters, no additional documentation changes the outcome.
What if my two-year deadline is coming up and my dispute is not resolved?
See CP320B — the IRS notice and Form 907 process that lets both sides agree in writing to extend the suit deadline, as long as both sides sign it before the original two years runs out.