How Employers Can Protest a Disallowance Notice for the Employee Retention Credit Program

How Employers Can Protest an IRS Disallowance Notice for the Employee Retention Credit Program

Receiving an IRS disallowance or partial disallowance notice for your Employee Retention Credit (ERC) claim can be daunting. However, employers have clear options to appeal the decision and protect their credits. This article will guide you through the steps of crafting an effective rebuttal or protest letter and navigating the appeals process.

Protesting Disallowances Under $25,000

If the disallowance amount is less than $25,000, employers can create a straightforward protest letter. Here’s what it should include:

1. State the Obvious:
   • Clearly express that the employer is appealing the disallowance or partial disallowance of the ERC.
2. List Disallowed Items:
   • Identify each disallowed item you disagree with and explain why the IRS decision is incorrect.
3. Provide Required Contact Information:
   • Employer and ownership details:
     • Name and address
     • Taxpayer Identification Number (EIN)
     • Daytime phone number
   • The reference number from the top of the IRS disallowance notice.
   • Attach a copy of the original IRS disallowance notice.
4. Mail the Letter:
   • Send the protest letter to the address provided on the IRS disallowance notice within 30 days of receipt.

Protesting Disallowances Over $25,000

For disallowance amounts exceeding $25,000, a formal protest to the IRS’s Office of Appeals is required. Follow these steps:

1. Prepare a Written Protest Letter:
   • Clearly state that the employer would like to appeal the disallowance to the IRS Office of Appeals.
2. Identify Tax Periods and Disallowed Items:
   • List the tax periods, years, and specific disallowed items the employer is disputing. Provide detailed reasons for disagreement.
3. Include Employer Contact Information:
   • Employer name and address
   • Contact name (individual responsible for the protest)
   • Taxpayer Identification Number (EIN)
   • Daytime phone number
   • Reference number from the IRS disallowance notice
   • Copy of the original IRS disallowance notice.
4. Provide Supporting Documentation:
   • Include detailed statements of facts supporting your protest. Attach any relevant evidence, such as payroll records, financial statements, or prior correspondence with the IRS.
5. Cite Relevant Laws or Authorities:
   • Reference specific laws, regulations, or rulings that support your position.
6. Sign the Perjury Statement:
   • This statement is usually found on the second page of the disallowance notice. Both the employer and their CPA or attorney should sign and date it.
7. Mail the Protest Letter:
   • Send the formal written protest letter and all supporting documentation to the address listed on the first page of the IRS disallowance notice.
   • Additionally, send copies of the protest letter and supporting documentation to the IRS Office of Appeals.

Additional Recommendations

1. Involve Your CPA or Attorney:
   • Have your CPA or legal representative co-sign the protest letter for added credibility.
2. Engage Local Representatives:
   • Send a copy of the formal protest letter to your local Congressperson or Senator. Their offices often assist taxpayers in resolving disputes with the IRS.
3. Use Certified Mail:
   • Mail all documents via the United States Postal Service using first-class or certified mail to ensure delivery can be tracked.
4. Monitor the Process:
   • Request IRS transcripts to track the status of your protest.
   • Call the IRS every 30 days for updates on the appeal.
5. Consider Legal Action if Necessary:
   • If the IRS denies your protest, you may need to hire a third-party specialist to file suit or negotiate further. Select a professional with extensive experience in resolving IRS disputes.

Next Steps for Employers

If you’ve received an IRS disallowance or partial disallowance notice, act quickly. Protest letters must typically be submitted within 30 days. Rockerbox recommends contacting the individual or firm that filed your original ERC claim to discuss your options.

If you’re unable or unwilling to work with your original provider, Rockerbox can help evaluate your situation and guide you through the protest process. While Rockerbox does not practice before the IRS, we can work with you to create and mail the formal protest letter, or, connect you with trusted professionals who specialize in resolving taxpayer discrepancies.

Don’t let an IRS disallowance hinder your ERC claim. Take action today to protect your credits and your business.