Complete Processing of All Employee Retention Credit Claims and Ensure Taxpayer Rights Are Protected

TAS is reviewing how to incorporate this initiative into an existing or new Collaborative Team, a Systemic Advocacy Project, or a potential FY 2025 Annual Report to Congress Most Serious Problem. Progress during this period was affected by the lapse in appropriations and related operational impacts, including reduced staffing capacity, reassignment of work and priorities, and a reevaluation of TAS’s approach to managing systemic advocacy objectives and associated initiatives.

IRS – Progress by the stated deadline was affected by the lapse in appropriations and related operational impacts, including reduced staffing capacity, and reassignment of work and priorities. Currently, the IRS plans to complete initial review of all ERC claims by December 31, 2026. TAS will continue to push for the IRS to expedite review of ERC claims.

Appeals – The IRS agreed to establish a standardized process for handling Forms 907 for taxpayers with disallowed ERC claims who are nearing statute expiration. The IRS expects to provide affected taxpayers with direct correspondence and online guidance explaining statute deadlines, Form 907 submission procedures, and the approval process. The IRS also plans to designate a centralized unit to receive and route Forms 907 for execution by the appropriate officials.

Because routing and approval procedures vary across Business Operating Divisions (BODs), the IRS stated a fully centralized process is not operationally feasible. By the end of this FY, the IRS committed to have each BOD review its internal procedures and work toward greater consistency, while also improving public guidance and controls to help ensure Forms 907 are routed and processed timely. TAS will continue monitoring and advocating for better tracking of statue cases.

IRS – During Quarter 3, TAS continued advocating for the timely and fair resolution of ERC claims through regular engagement with IRS program leadership. TAS emphasized the importance of completing ERC claim reviews as expeditiously as possible, while ensuring taxpayers experiencing financial hardship were prioritized. TAS also continued advocating for processing approaches that reduce taxpayer burden, improve transparency, and protect taxpayer rights.

The IRS reported that it has completed the substantial majority of its unprocessed ERC inventory and remains on track to complete the initial review of substantially all remaining ERC claims by December 31, 2026. Although this represents meaningful progress, the projected completion date extends beyond the timeframe TAS has encouraged the IRS to achieve. Continued oversight will be important to ensure the remaining claims are processed as efficiently as possible and taxpayers receive resolutions.

TAS will continue working with the IRS to monitor progress, advocate for the expedited review of remaining ERC claims, and identify opportunities to improve the ERC claims process while minimizing taxpayer burden.

Appeals – Appeals continues to rely on existing procedures to monitor refund suit limitation periods. Consistent with its response to the 2026 Most Serious Problem (MSP), Appeals Technical Employees (ATEs) remain responsible for tracking refund suit limitation periods and documenting Form 907 extension dates in the Case Activity Record (CAR). Appeals plans to implement a system to track Form 907 execution once the necessary guidance is issued.

Although Appeals has identified a future system, taxpayers are not currently notified of pending statute expiration dates. TAS’s continued monitoring of these efforts will help determine whether additional improvements are needed to increase transparency and reduce the risk of taxpayers inadvertently losing their refund rights.

TAS will continue engaging with Appeals to monitor implementation of these planned enhancements and will follow up through the TAS Appeals Advisory Board to advocate for improvements that better protect taxpayer rights.

TAS is reviewing how to incorporate this initiative into an existing or new Collaborative Team, a Systemic Advocacy Project, or a potential FY 2025 Annual Report to Congress Most Serious Problem. Progress during this period was affected by the lapse in appropriations and related operational impacts, including reduced staffing capacity, reassignment of work and priorities, and a reevaluation of TAS’s approach to managing systemic advocacy objectives and associated initiatives.

IRS – Progress by the stated deadline was affected by the lapse in appropriations and related operational impacts, including reduced staffing capacity, and reassignment of work and priorities. Currently, the IRS prioritizes the transcription, review, and risk assessment of ERC claims for taxpayers who are experiencing financial hardships. Claims the IRS identifies as low risk are processed expeditiously, and claims warranting examination are started expeditiously. TAS will continue to push for the IRS to expedite review of ERC claims.

Appeals – The IRS agreed to establish a standardized process for handling Forms 907 for taxpayers with disallowed ERC claims who are nearing statute expiration. The IRS expects to provide affected taxpayers with direct correspondence and online guidance explaining statute deadlines, Form 907 submission procedures, and the approval process. The IRS also plans to designate a centralized unit to receive and route Forms 907 for execution by the appropriate officials.

Because routing and approval procedures vary across Business Operating Divisions (BODs), the IRS stated a fully centralized process is not operationally feasible. By the end of this FY, the IRS committed to have each BOD review its internal procedures and work toward greater consistency, while also improving public guidance and controls to help ensure Forms 907 are routed and processed timely. TAS will continue monitoring and advocating for better tracking of statue cases.

IRS – TAS continued working with the IRS to reinforce the importance of timely review and resolution of Employee Retention Credit (ERC) claims filed by taxpayers experiencing financial hardship. TAS emphasized the financial burden that prolonged delays can place on affected taxpayers and elevated individual cases involving substantial hardship when appropriate.

The IRS reported continued progress in reducing its ERC inventory and processing pending claims. However, this update does not include specific data showing how many hardship claims were prioritized or how quickly those claims were resolved. Timely and transparent handling of these cases remains critical to protecting taxpayer rights and preventing further financial harm.

TAS will continue advocating for expedited review of hardship claims, sufficient staffing and resources, and clearer information about how the IRS identifies and prioritizes taxpayers experiencing financial hardship.

Appeals – The IRS Independent Office of Appeals is updating Form 907, Agreement to Extend Time to Bring Suit, to improve guidance for taxpayers with disallowed Employee Retention Credit claims who are approaching the deadline to file a refund suit. TAS recommended that the form explain its purpose, when and how it must be filed, and where taxpayers should submit it.

Appeals accepted the recommendations to add information about the form’s purpose and filing requirements but declined to include submission-location instructions because procedures vary among the IRS business units that receive the form. The added information is helpful, but the lack of clear submission instructions may still create confusion and increase the risk of delay.

TAS will continue monitoring the Form 907 revisions and advocating for clear filing instructions and more consistent procedures so taxpayers can protect their refund rights.

TAS is reviewing how to incorporate this initiative into an existing or new Collaborative Team, a Systemic Advocacy Project, or a potential FY 2025 Annual Report to Congress Most Serious Problem. Progress during this period was affected by the lapse in appropriations and related operational impacts, including reduced staffing capacity, reassignment of work and priorities, and a reevaluation of TAS’s approach to managing systemic advocacy objectives and associated initiatives.

No substantive progress has been made in Q2. TAS will continue to attempt to engage the IRS in meaningful dialogue regarding resources to quickly and efficiently process taxpayer responses to ERC disallowance notices.

TAS continued advocating for the IRS to allocate sufficient resources to efficiently review and process taxpayer responses to ERC disallowance notices. TAS emphasized the need to streamline document review procedures and adopt more efficient methods for determining whether claims should be allowed or forwarded to Appeals when requested. TAS also elevated cases involving significant taxpayer hardship when delayed review of submitted documentation increased the risk of taxpayer harm.

In addition, TAS collaborated closely with the IRS to develop and implement a new ERC-specific Form 907 process for taxpayers who responded to an ERC disallowance notice but whose supporting documentation had not yet been reviewed and who had fewer than seven months remaining on the statute of limitations under Internal Revenue Code (IRC) § 6532. This collaborative effort helps protect taxpayers’ rights by reducing the risk that they will lose the opportunity to pursue a refund because the IRS has not completed its review before the statute expires.

TAS will continue working with the IRS to promote the timely and consistent review of ERC disallowance responses, advocate for efficient processing procedures, and protect taxpayers from statute-related harm.

TAS is reviewing how to incorporate this initiative into an existing or new Collaborative Team, a Systemic Advocacy Project, or a potential FY 2025 Annual Report to Congress Most Serious Problem. Progress during this period was affected by the lapse in appropriations and related operational impacts, including reduced staffing capacity, reassignment of work and priorities, and a reevaluation of TAS’s approach to managing systemic advocacy objectives and associated initiatives.

The IRS agreed to establish a standardized process for handling Forms 907 for taxpayers with disallowed ERC claims who are nearing statute expiration. The IRS expects to provide affected taxpayers with direct correspondence and online guidance explaining statute deadlines, Form 907 submission procedures, and the approval process. The IRS also plans to designate a centralized unit to receive and route Forms 907 for execution by the appropriate officials.

Because routing and approval procedures vary across Business Operating Divisions (BODs), the IRS stated a fully centralized process is not operationally feasible. By the end of this FY, the IRS committed to have each BOD review its internal procedures and work toward greater consistency, while also improving public guidance and controls to help ensure Forms 907 are routed and processed timely. TAS will continue monitoring and advocating for better tracking of statue cases.

TAS collaborated with the IRS Small Business/Self-Employed (SB/SE) Division to establish procedures for tracking the two-year statute of limitations under Internal Revenue Code (IRC) § 6532. TAS provided recommendations for the new CP 320B notice, which informs taxpayers when six months remain on their IRC § 6532 statute and advises them of their eligibility to file Form 907 to request an extension. TAS also provided recommendations for SB/SE’s website content explaining the statute expiration period and Form 907 eligibility.

The IRS has implemented several improvements to better protect taxpayers’ refund rights, including issuing CP 320B notices to taxpayers whose ERC claims have been disallowed and whose IRC § 6532 statute will expire within six months. The IRS has also established a centralized Document Upload Tool and tracking codes for Form 907 submissions.

As these improvements have been implemented, this activity will be closed and TAS will continue collaborating with IRS through the FY 2027 June Report to Congress Initiative 6, Protect taxpayer refunds by improving the Statute Extension Process. In the 2025 Amended Returns MSP, TAS proposed four recommendations for improvement to the Form 907 process. IRS agreed to three recommendations and TAS will continue to monitor and work with IRS until the recommendations are implemented.