Is your business prepared for the shifting landscape of the Employee Retention Credit as we approach late 2026?
The October 2026 ERC Deadline marks a pivotal moment for unclaimed funds and enforcement actions. As a trusted CPA in Moreno Valley, Catalyst CPA provides the clarity you need to navigate these complex IRS changes.
Essential Takeaways
- Processing Target: The IRS aims to resolve all remaining ERC claims by the end of 2025.
- Critical Window: Businesses have exactly two years from receiving a disallowance notice to file suit.
- Enforcement Surge: Audit activities regarding improper claims have significantly escalated.
Current Status of the ERC Program in 2026
As of October 2026, the Employee Retention Credit landscape has dramatically transformed. Following the April 15, 2025 closure of the claim period, over 597,000 unprocessed claims remained in the IRS inventory. Despite aggressive efforts to clear the backlog, many Catalyst CPA clients and businesses across the Inland Empire continue waiting for resolution.
The National Taxpayer Advocate has emphasized that it could take until at least the end of calendar year 2025 to complete processing all claims. Adding to the complexity for any Riverside County CPA, approximately 84,000 returns claiming the ERC have been partially or fully disallowed, often without clear explanations to taxpayers.
Critical October 2026 ERC Deadline Rules
This period represents a critical juncture for claims due to several converging deadlines and regulatory requirements:
The Two-Year Statute of Limitations Crisis
Businesses that received ERC disallowance notices in October 2024 are now approaching their two-year statutory deadline to file suit in federal court. This October 2026 ERC Deadline is absolute—once passed, businesses are legally barred from receiving refunds even if they are later determined to be eligible. Proper tax preparation and documentation are vital here.
Form 907 Filing Requirement
To protect their rights, businesses approaching the two-year deadline must file Form 907 (Agreement to Extend the Time to Bring Suit) to extend the limitations period. This form requires careful execution and filing well before the deadline expires, often necessitating professional business consulting.
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Understanding ERC Disallowance Notices
By October 2026, thousands of businesses have received various types of disallowance notices. Each requires different response strategies according to IRS guidelines:
- Letter 105C: Full Disallowance – indicates a complete rejection of an ERC claim.
- Letter 106C: Partial Disallowance – indicates the IRS has partially disallowed an ERC claim, typically due to calculation errors.
- Letter 6577C: Proposed Changes – questions claims after a refund has already been issued, potentially requiring repayment.
Practical Steps Before the October 2026 ERC Deadline
As an Inland Empire accountant firm, we recommend these immediate actions:
- Review disallowance timelines and calculate the precise two-year deadline.
- File Form 907 immediately if approaching the deadline.
- Consolidate all documentation, including government orders and wage records.
- Verify electronic payment information with the IRS.
- Consult with specialized ERC counsel or review our tax tips for guidance.
Frequently Asked Questions About the ERC Deadline
What happens if I miss the October 2026 ERC Deadline?
The two-year statute of limitations is strict. If you miss this window after receiving a disallowance notice, you are legally barred from filing suit to claim your refund, regardless of eligibility.
Can a Riverside County CPA help with disallowance letters?
Absolutely. Local experts can help you analyze Letter 105C or 106C, organize your documentation, and determine if filing Form 907 is the correct strategic move for your business.
How do 2025 tax changes impact these claims?
While the 2025 tax changes primarily affect future filings, the IRS’s focus on clearing the 2025 backlog has intensified enforcement on older ERC claims, making compliance checks more rigorous.
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Important Notice: Information only — not tax, accounting, or legal advice. Rules change and facts matter. Talk to a qualified professional before acting. Reading this post doesn’t create a CPA–client relationship. Review our Terms of Service for complete details.
