Received a Disallowance Letter for Your ERC? Here's What to Do Next
If your business received IRS Letter 105-C disallowing your Employee Retention Credit (ERC) claim, you might feel confused and frustrated. The IRS has tightened its review process, and claims are being denied for a variety of reasons. But before you worry too much, let’s break down what this letter means and what your next steps should be.
What Does Letter 105-C Mean?
The IRS uses Letter 105-C to officially notify you that your ERC claim has been disallowed. This could impact your refund or the tax reduction you were expecting. The letter provides the reason for the denial, the time period for which it was disallowed, and outlines your rights to appeal the decision or take legal action.
Why Did I Receive This Letter?
Receiving this letter doesn’t necessarily mean you did anything wrong. It may simply indicate that the IRS has flagged certain aspects of your claim as needing more documentation or clarification. For example, your claim might have been disallowed if:
Your records didn’t show that you had employees during the eligible time period.
You didn’t meet the decline in gross receipts test or provide sufficient documentation.
There were questions about whether your business was fully or partially suspended due to COVID-19.
Did You Do the Detective Work to Back Up Your Claim?
The IRS expects you to provide detailed documentation to support your claim, and this is where the detective work comes in. Did you ensure that all the required records, such as W-2s, gross receipts, and government orders for business suspensions, are in order? Even small errors or omissions can lead to disallowance.
What Are Your Next Steps?
Review the Reason for Disallowance: Carefully go over the explanation provided in your Letter 105-C.
Gather Documentation: Provide detailed records addressing the reason your claim was disallowed. This includes:
Proof of eligible wages paid to employees.
Documentation of your business’s decline in gross receipts.
Government orders showing that your operations were impacted by COVID-19 restrictions.
Appeal if Needed: If you disagree with the disallowance, you can file an appeal within two years of receiving the letter. Early action is best.
How Can Boston Growth Partners Help?
At Boston Growth Partners, we specialize in handling Employee Retention Credit claims and understand the complexities of ERC eligibility.
If you received Letter 105-C, we can help you gather the right documentation and build a strong case to back up your claim. Don’t wait until it’s too late—let us help you navigate the appeal process and maximize your chance of getting your credit reinstated.
Contact us today for a free consultation to review your disallowance letter and start the detective work necessary to back up your claim!