IRS Disallowed ERC Claim? Audit & Repayment Defense Guide

The Law Office of Anthony N. Verni, Inc.

The IRS is now aggressively reviewing Employee Retention Credit (ERC) claims. If you are a company whose IRS disallowed ERC claim or received an IRS ERC assessment demanding repayment or is currently under IRS audit regarding your ERC claim, you need to know where you stand in the process and what options are available. The ERC rules are complex, the deadlines are strict, and the IRS takes the position that businesses, not promoters or preparers, are responsible for paying money back if claims were improper. That is why hiring an experienced tax attorney for ERC claims and taking immediate action is critical to preserving your rights, keeping all options open, and limiting your financial exposure.

When Time Is Short—Act First, Evaluate Next

In many cases, IRS deadlines do not allow for a complete, detailed evaluation before action must be taken. For example, you may have only 30 days to respond to a disallowance or assessment notice. Appeals and refund rights can be permanently lost if you miss a response deadline. When time is short, file a timely ERC claim disallowance appeal or response first to preserve your rights, then continue with a full evaluation and recalculations afterward.

Key IRS Notices and Timelines

Notice of Claim Disallowance (IRS Letter 105C ERC): 30 days to appeal within IRS; 2 years to file refund suit in court.
• Letter 3523 (Proposed Disallowance): 30 days to protest to IRS Appeals.
• Notice of Deficiency ERC (90-Day Letter): 90 days to file a petition in U.S. Tax Court.
• Notice of Assessment (CP210 / CP15): 30 days or less to dispute or appeal.
• Collection Notices (CP501, CP503, CP504): Progressive warnings; CP504 = levy warning.
• Final Notice of Intent to Levy (LT11 / Letter 1058): 30 days to request CDP hearing.

Why a Comprehensive Strategy Is Essential

An effective response requires a comprehensive strategy: independent evaluation of eligibility and risk exposure, a preliminary game plan to prioritize deadlines, reassessment of eligibility tests, recalculation of credit amounts, and sometimes a multi-pronged approach, defending before the IRS while also pursuing claims against ERC firms.

Why You Need an Experienced Tax Attorney

A tax attorney can help you manage urgent deadlines, develop a comprehensive IRS audit representation plan, represent you before IRS Appeals or in Tax Court, and pursue malpractice or fraud claims against third parties. Most importantly, a tax attorney for ERC claims can ensure you don’t lose rights by missing deadlines.

Action Steps for Businesses

✓ Don’t ignore IRS notices or the notice of deficiency by ERC; respond by the deadline.
✓ Gather all ERC-related documents.
✓ Get an independent evaluation of eligibility and credit amounts.
✓ Work with counsel on a preliminary game plan.
✓ Reassess eligibility and recalculate credits.
✓ Consider a multi-pronged approach: defend before the IRS while pursuing recovery from third parties.
✓ Consult an experienced tax attorney to create an ERC audit defense and protect your rights.
✓ Prepare for an ERC claim disallowance appeal.

Conclusion

The ERC was heavily promoted, and many companies are now facing IRS disallowed ERC claims, audits, or assessments. If this happens to you, act quickly; ignoring notices or missing deadlines can permanently cost you your appeal rights and open the door to IRS collection actions. The best approach is a comprehensive ERC audit defense strategy: independent review, recalculations, and a preliminary game plan. Depending on your circumstances, this may also include a multi-pronged approach that addresses both IRS defense and claims against ERC promoters. An experienced tax attorney can guide you through both the urgent deadlines and the long-term strategy needed to protect your business.

Do not ignore IRS notices. Missing deadlines can permanently forfeit your rights. For immediate assistance, contact The Law Office of Anthony N. Verni, Inc.

FAQs

Q1. What happens if the IRS disallows my ERC claim?

If the IRS disallows your ERC claim, you may receive a notice demanding repayment plus penalties. You generally have 30 days to appeal within the IRS or pursue further legal remedies.

Q2. Can I appeal an IRS ERC disallowance?

Yes. Depending on the notice, you may appeal to IRS Appeals, file a petition in Tax Court, or pursue a refund claim. Deadlines are strict, so timely action is essential.

Q3. Will I be personally liable if my ERC claim was filed by a third-party promoter?

Yes. The IRS holds the business—not the promoter—responsible for repaying improper ERC claims. You may have separate legal remedies against promoters, but the IRS will still pursue your business first.

Q4. How long do I have to respond to an IRS ERC notice?

Response times vary by notice:
- 30 days for most disallowances/assessments
- 90 days for a Notice of Deficiency (Tax Court petition)
- Immediate action if you receive levy warnings

Q5. Do I need a tax attorney for an ERC audit or repayment issue?

Yes. An experienced tax attorney can protect your appeal rights, manage strict deadlines, and represent you before IRS Appeals or Tax Court. They can also explore claims against ERC promoters.