IRS Letter 105C: What a Refund Claim Disallowance Means

What is IRS Letter 105C?

Letter 105C, Claim Disallowed, is the IRS notice that a claim for credit or refund has been denied. It states the reason for the decision, the date of the decision, and the tax year or period involved. It also describes appeal rights and the time limit for filing a refund suit in court.

The IRS procedure manual section on claims, IRM 21.5.3, lists Letter 105C as the letter used for fully disallowed claims. The same section says disallowance letters are sent by certified or registered mail, must include a complete agency address, and must state the specific reason for the disallowance together with the claim amount.

That required explanation is the most useful part of the letter. When the reason is timeliness, the manual says the letter must include the date the original or amended return was received, or the envelope postmark date, and the date by which the claim needed to be filed. Those two dates make it possible to compare the IRS view with the taxpayer's own filing records.

The letter date matters for a separate reason. The manual warns IRS employees that a reprint of the letter shows the date it was printed, not the date on the letter actually issued. For a taxpayer, the original mailed letter is the document that shows the date the two-year suit period is counted from, so it deserves to be kept with the claim file.

Why does the IRS disallow a refund claim?

Common reasons include a claim filed after the time limit and a claim that was timely but limited in amount. Publication 556 also lists claims covered by a settlement, closing agreement, offer in compromise, or final court order. Whatever the reason, the IRS must explain why a refund claim was disallowed.

The general timing rule appears in Publication 556: a claim for credit or refund is generally timely if filed within three years from the date the original return was filed or two years from the date the tax was paid, whichever is later. A claim filed after the three-year period but within two years of payment is limited to the tax paid during the two years before the claim.

The table describes categories, not conclusions. The specific paragraph in the letter controls what the IRS actually decided. A letter that cites late filing raises different questions from one that cites eligibility, and the useful records differ as well.

Publication 556 is dated September 2013, but it remains the IRS publication on examinations, appeal rights, and claims for refund. Its description of the explanation requirement matches the current procedure manual, which ties the explanation to section 6402(l) of the Internal Revenue Code.

How is Letter 105C different from Letter 106C and other notices?

Letter 105C covers fully disallowed claims and partial disallowances that leave a balance due or zero balance. Letter 106C covers other partial disallowances, where some refund is still issued. Both carry appeal rights and a suit period. A math error notice or a balance due notice is a different kind of IRS document.

The procedure manual gives an example of how a partial disallowance can still produce Letter 105C. An amended return reports a tax increase and a credit increase, and only the tax increase is accepted. Because the result is a balance due, Letter 105C is used even though part of the amended return was processed.

The manual makes a point that matters here: an original return with a math error is not a claim. A CP12 notice about a corrected refund therefore follows its own process rather than the claim disallowance rules. When an account adjustment creates a balance, a separate bill such as a CP22A notice may follow the disallowance letter.

What does the two-year period on Letter 105C mean?

A refund suit in a United States District Court or the Court of Federal Claims generally has to be filed within two years from the date of the disallowance letter. Asking the IRS to reconsider or requesting an Appeals review does not stop that period. Form 907 can extend it by written agreement before it ends.

The TAS page on notices of claim disallowance states that the two-year period does not stop while the IRS or Appeals reconsiders the claim. It adds that a refund or credit may not be available after the suit period ends, even if Appeals or the IRS later agrees with the claim.

The IRS page on ERC Letter 105-C says the same thing in direct terms: by law, the IRS cannot issue a refund or allow a credit after the two-year period unless suit is filed during that period. It also describes Form 907, Agreement to Extend the Time to Bring Suit, which must be signed by both parties before the period expires.

A suit is a court proceeding, not an IRS process. The TAS page notes that the District Courts and the Court of Federal Claims are part of the judicial branch and have no connection with the IRS. Whether a suit makes sense is a question for a qualified tax professional or attorney who has seen the actual letter and records.

What happens if there is no response to Letter 105C?

If the taxpayer agrees with the reason in the letter, the IRS and TAS pages say no further action is needed. The disallowance stands and the account reflects it. If the adjustment leaves a balance, the IRS sends a separate balance due notice with its own payment date. Silence does not reopen the claim.

Agreeing with the letter is a real option, and both the TAS and IRS sources describe it plainly. A claim that was filed late, for example, may have no records showing an earlier filing date. In that situation the letter simply closes the claim.

Doing nothing has a consequence that is easy to overlook when the taxpayer actually disagrees. The two-year period keeps running whether or not anyone responds. The manual also describes what happens when the same claim is filed again later: if the time to file suit has expired, the IRS does not consider the claim and refers the taxpayer back to the original disallowance notice.

When the disallowance leaves a balance due, the TAS page says a balance due notice follows with a payment date. That bill is a separate document with its own date. Interest and penalties on an unpaid balance are covered in the failure to pay penalty guide, and the general effects of an unanswered IRS letter are covered in what happens if you ignore an IRS letter.

What goes into a response that disagrees with the disallowance?

A disagreement goes to the address on the letter. It explains why the claim should be allowed, addresses the specific reason the IRS gave, and includes supporting documents. It can also ask the IRS to forward the case to the Independent Office of Appeals if the claim is still not allowed after review.

The TAS pages give a concrete example for a timeliness denial: a post office receipt showing the original return was filed on time, or proof of an extension of time to file. The point is to answer the actual reason. A general statement that the claim was correct does not address a letter that says the claim was late.

1. 1.Copy the reason paragraph from the letter and list each fact it relies on.
2. 2.Gather records that speak to those facts, such as filing proof, payment records, or the worksheets behind the claimed amount.
3. 3.Write a short explanation that connects each record to the stated reason.
4. 4.If an Appeals review is wanted, say so in the response and follow Publication 5 for the protest content.
5. 5.Keep a copy of everything sent, with the date and delivery evidence.

The IRS page on preparing a request for Appeals says a protest is mailed to the IRS address on the letter that explains appeal rights, not directly to Appeals. The office that made the decision considers the protest first and forwards the case only if it cannot resolve the issue. The page also explains who may represent a taxpayer before Appeals.

A representative who will speak with the IRS needs a power of attorney on file. The IRS power of attorney guide explains Form 2848 and how it differs from an information authorization.

What happens after the IRS receives a response?

The manual treats a response as a new case. If the information supports the claim, the IRS adjusts the account. If not, it may send a no consideration letter explaining what is missing. If Appeals was requested and the claim still is not allowed, the case is forwarded and Appeals typically makes contact within 120 days.

The manual's table separates several outcomes. A claim resubmitted with no new information and no appeal request is reviewed to confirm the disallowance was correct. New information that supports the claim leads to a normal adjustment. New information that is not enough leads to a no consideration letter explaining what else would be needed, rather than a second disallowance letter.

When an appeal is requested, the package sent to Appeals includes the original claim, the original return or a print of it, a copy of the disallowance letter, and the appeal statement. The IRS page on ERC disallowances says Letter 86C tells the taxpayer that the case has moved to Appeals, and Appeals then makes contact separately.

For ERC cases where no appeal was requested and the IRS is not persuaded, the IRS page says it will either request more information with Letter 3064C or send Letter 916C stating that the original disallowance stands. The same IRS page counts the two-year suit period from the date of the original Letter 105-C, so later letters in the review are worth filing alongside it rather than treated as a fresh start.

If the review results in a refund, the TAS page estimates it is sent about six to eight weeks after the IRS receives the response and adjusts the account. That is a general estimate, not a promised date, and it does not apply when a case is still under review.

How is an ERC Letter 105-C different from other claim denials?

For the Employee Retention Credit, the IRS publishes specific documentation lists for each eligibility basis, a filing cutoff for late 2021 claims, and a Form 907 extension route through the Document Upload Tool. A business that received Letter 105-C for a period cannot use the claim withdrawal program for that period.

The IRS page on ERC Letter 105-C says a disagreement needs documents supporting eligibility in all instances, plus timeliness and claim amount where those were stated reasons. It then lists what to include for each basis: government orders and records showing a full or partial suspension, gross receipts records for the claim year and the comparison year, or records showing recovery startup business status.

Timeliness has a specific ERC rule. The IRS page quotes letter language under Public Law 119-21: no credit or refund is allowed after July 4, 2025, for the last two quarters of 2021 unless the claim was filed on or before January 31, 2024. A response to that reason would rely on proof of the filing date, such as a certified mail receipt.

In IR-2026-58, issued April 27, 2026, the IRS announced a streamlined Form 907 submission for ERC disallowances. It applies when the taxpayer is waiting for the IRS to consider a response to Letter 105-C or 106-C and six months or less remain in the two-year period. The form is uploaded through the Document Upload Tool by selecting notice CP320B.

The IRS page also notes that a Letter 105-C about a credit other than the ERC should be handled using the instructions in that letter. The ERC documentation lists do not apply to an individual's amended return or another type of claim.

How does Letter 105C fit with other IRS notices?

Letter 105C ends a claim review. Earlier notices may have held a refund for verification, and later notices may bill a balance created by the adjustment. Reading them in order shows where the account stands. The disallowance letter is the one that carries appeal rights and the two-year suit period for the denied claim.

A refund hold such as a CP05 notice means the IRS is reviewing a return before releasing a refund. That review concerns an original return, while Letter 105C concerns a claim for credit or refund. Keeping each notice in date order with its purpose noted makes the sequence easier to follow.

A disallowance is also different from a proposed change during an audit. When the IRS proposes additional tax, the process usually runs through examination reports and a notice of deficiency, described in the notice of deficiency guide. A request to reopen a completed audit uses audit reconsideration. Neither route replaces the claim disallowance process or its suit period.

A useful file holds the claim as filed, proof of when it was filed, the original Letter 105C, any response and delivery evidence, any Appeals correspondence, any signed Form 907, and any later bill. With those papers together, a conversation with the IRS or a qualified tax professional can focus on the actual reason and the actual dates.

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