Receiving a tax notice or letter is never a pleasant experience. It can be confusing and frustrating if you don't understand why you received the notice in the first place. That's why we wrote The Ultimate Guide to Tax Notices and created a tax notice library filled with the most common tax notices and letters you might receive. We believe the process of staying compliant with your taxes should be as effortless as possible.
General Information
- What is the notice number? LTR105C
- What government agency sends this notice? The Internal Revenue Service (IRS)
- What is this notice about? The IRS disallowed, or denied, the Employee Retention Credit that you claimed either as a refund or as a reduction of the tax you owed for the tax period.
- What should you do if you receive this notice?
- If you agree with the IRS disallowing your claim, you don't need to do anything else.
- If you disagree, you need to respond to the letter with additional documentation to support your eligibility and claim amount.
- Request an appeal if desired—either with your initial response or at any time within two years of the date on Letter 105-C.
- Consider filing suit with a U.S. District Court or with the U.S. Court of Federal Claims before the two-year deadline if you wish to preserve your right to a refund (appeals do not extend this two-year period).
- If extra time is needed to file suit, discuss extending the two-year period with the IRS using Form 907.
FAQs & Additional Information
- Am I eligible for the claim withdrawal program if I received Letter 105-C?
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- Unfortunately, no. This letter means the IRS has already processed and denied your claim for that tax period, so the withdrawal program isn’t available for those quarters.
- The withdrawal program only applies when the IRS hasn’t started processing a claim yet.
- What is the two-year timeline mentioned in Letter 105-C, and why does it matter?
- You generally have two years from the letter date to file a lawsuit if you still disagree with the decision.
- Appeals do not extend this deadline, so keep an eye on the calendar.
- If time is running short and you still haven’t received a final ruling or refund, consider filing suit or ask the IRS for an extension (Form 907) to preserve your rights.
- If I disagree with the disallowance, what documents do I need to submit?
- Provide proof of qualified wages (like W-2s) and, if relevant, copies of government orders that caused your full or partial shutdown.
- Include gross receipts records for both the ERC-claimed quarters and comparison periods (usually 2019).
- If you claimed the credit as a recovery startup business, show that you began operating after February 15, 2020, and meet the $1 million or less average annual gross receipts requirement.
- Make sure your ERC calculation worksheets exclude wages for related individuals, any Paycheck Protection Program (PPP)-forgiven amounts, and wages for employees actively working if you’re a large eligible employer.
- How does the appeals process work if I disagree with the IRS decision?
- You can request an appeal in your written response or any time within two years from the date on Letter 105-C.
- If the IRS still disputes your claim after reviewing your documentation, it’ll forward your case to the IRS Independent Office of Appeals for an impartial review.
- What happens after I send my response or extra information?
- If the IRS agrees with your supporting documents, they’ll process your ERC claim (possibly in whole or in part).
- If they continue to disagree and you haven’t requested an appeal, you’ll get another letter confirming the denial.
- If you did request an appeal and the IRS still doesn’t allow the credit, your case moves to Appeals, and you’ll get a Letter 86-C letting you know it’s been transferred.
- Can someone else represent me during this process?
- Absolutely. If you’re juggling different responsibilities and would like a trusted tax professional or attorney to step in, just include Form 2848 (Power of Attorney) or similar authorization with your response.
What does it look like?
Resources
Looking for more information about this notice? Here are some helpful resources:
How can we help you today?
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