Surviving the Covid-19 pandemic may have felt like climbing Mount McKinley. Learning that your business could apply for Employee Retention Credit (ERC) felt like a much-needed break on the trail, but now you’ve received a mysterious letter from the IRS. If you’ve received a claim of disallowance from the IRS, Highland Tax Group can give you the map to resolve your tax troubles.
Reasons for Receiving a Letter 105C or Letter 106C
If you receive a claim of disallowance, either a Letter 105C or 106C, it means that you were not eligible for the ERC, didn’t file it on time, or the amount of the credit is incorrect. We’ll discuss how to respond to each below, but first, let’s explain the difference between a Letter 105C and 106C.
What is a Letter 105C?
This is the most common notice of claim disallowance letter the IRS sends. A Letter 105C denies your refund request for the ERC in its entirety.
What is a Letter 106C?
A Letter 106C is similar to a Letter 105C except that it is a notice of partial disallowance. It simply means the IRS has reviewed your ERC and determined that you are entitled to some, but not the full, refund amount.
How to Respond to a Notice of Claim Disallowance
Now that you understand the claim of disallowance letter you received, you can realize which trailhead to pick up to start your journey to address the problem successfully.
You Don’t Need to Do Anything
Notices of disallowance are one of the few IRS letters you could receive that don’t require any action. When you don’t respond to Letter 105C, the IRS won’t file the amended return containing the ERC, and you won’t face any penalties. If you received a Letter 106C and don’t respond, you will be issued the partial refund indicated in the letter.
Protest the Notice of Disallowance
Protesting your notice of disallowance is essentially asking the IRS for an appeal. In your formal written protest, you must include your arguments for why the IRS assessment of your ERC filing was incorrect and provide any evidence in support of your case.
If you are unsure how to respond to your notice of disallowance or have additional questions, the tax professionals at Highland Tax Group are here to help.