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Summary of Employee Retention Credits

The employee retention credit (ERC) program was a key component of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). These credits were created to assist certain employers in continuing payroll during a shutdown due to the COVID-19 pandemic, businesses that experienced pandemic-related declines in gross receipts, and certain recovery startup businesses. Eligible businesses were those that employed no more than 100 FTEs in 2020 or 500 FTEs in 2021.

A business that sustained a full or partial suspension of their business operations in compliance with orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19 during the period starting in 2020 through the first three quarters of 2021 are eligible for ERC. Many businesses have claimed the ERC and are still waiting for payments.  

When the IRS denies an ERC claim as “late,” taxpayers are not without options—particularly if a timely but imperfect filing was later corrected. The informal claim doctrine can preserve timeliness and validity if the IRS had fair notice of the claim within the limitations period and the taxpayer later cured defects. This post explains what the doctrine is, why it matters in ERC/Form 941-X disputes, the elements to show, how to cure defects, and how to build a record for Appeals. 

Why the Informal Claim Doctrine Matters for ERC and Form 941?X

Taxpayers often submit ERC claims via Form 941-X. In practice, claims may be signed by the wrong person, include clerical errors, or require correction after initial mailing. If a timely submission gave the IRS fair notice of the ERC claim but was technically deficient, the informal claim doctrine may allow a later corrected filing to “relate back,” preserving timeliness and avoiding a denial based solely on an asserted late receipt of the corrected form.

At its core, the informal claim doctrine is an equitable exception that treats a timely but technically defective submission as a valid “informal” claim if: (i) the IRS received a written communication within the limitations period; (ii) the writing fairly notified the IRS of the nature of the refund/credit sought; (iii) he taxpayer intended to seek a refund/credit; (iv) the submission had sufficient specificity to apprise the IRS of the basis and period; and (v) the taxpayer later filed a proper amendment curing the defects.

The doctrine has been recognized as permitting a timely but deficient claim to preserve the taxpayer’s rights where formal defects and lack of specificity are remedied by a later amendment, and it applies so long as the claim is still pending administratively and no refund suit has been filed when the cure is submitted

Elements Taxpayers Should Be Prepared to Show

1) Written component – Provide evidence of a writing sent to the IRS within the limitations period (e.g., Form 941?X package, cover letter, schedules).

2) Notice of claim – Show that the writing fairly advised the IRS that the taxpayer was seeking the ERC for identified quarters.

3) Intent to seek refund/credit – Demonstrate that the filing sought a specific refund/credit, not merely supplied information.

4) Sufficient specificity – Identify the tax period(s), the credit/refund being claimed, and the basis (ERC on wages for the quarter).

5) Timely submission – Prove the submission reached the IRS within the applicable limitations period (e.g., delivery records, IRS acknowledgment).

Curing Defects

If the IRS contends that a filing was defective (e.g., signature authority, form error, clerical mistake), the cure is a corrected, properly executed filing submitted while the claim remains pending administratively.

• Submit a corrected Form 941-X (“replacement” or amended amendment) clearly referencing the original submission and identifying corrections.
• Ensure proper signatory authority and completeness of schedules.
• Include a concise statement that the submission is intended to cure formal defects in the earlier timely claim.

Documenting the record is critical:

• Delivery confirmations: FedEx/USPS tracking showing dates, addresses, and delivery.
• IRS acknowledgment/correspondence: Letters acknowledging receipt, processing, or payment.
• Denial notice: Maintain the exact language and date of any denial for Appeals framing.
• Refund check history: Copies or references to any refund checks or notices corroborating IRS processing.
• Chronology: A clear timeline linking all events.

Step-by-Step Roadmap to Prepare an Appeal under the Informal Claim Doctrine

1) Assemble the timeline – Identify the date the original Form 941 was filed, the date the initial Form 941?X was signed/mailed/delivered, any IRS acknowledgments, and the date of any corrections and the denial.

2) Identify the defect and the cure – Specify what was deficient in the initial filing and how the replacement submission corrected it (e.g., proper signatory, corrected lines).

3) Draft the protest letter – Clearly request Appeals review.

• Frame the issue: the initial timely filing gave fair notice; any defects were later cured; the corrected filing relates back.
• Tie facts to the doctrine’s elements: writing, notice, intent, specificity, timeliness, pending status/no suit.

4) Attach evidence.

5) Include a perjury statement.

6) Mail and track – Send via certified mail or courier with tracking and retain all confirmations.

7) Maintain a litigation hold – Preserve all records and communications until resolution.

Practical Checklist

• Identify the limitations period for the quarter(s) at issue.
• Confirm the initial submission date and collect delivery proof.
• Compile IRS acknowledgments or refund notices, if any.
• Pinpoint any defects in the initial filing.
• Prepare and file a corrected 941?X that expressly cures the defects.
• Draft a protest tying facts to the informal claim elements.
• Attach: POA, initial 941?X, delivery proofs, IRS letters, replacement 941?X, delivery proofs, denial letter, and a perjury declaration.
• Verify no refund suit has been filed before curing.
• Send the appeal via trackable method and preserve all receipts.

Common Pitfalls

• Relying on oral communications: the doctrine requires a writing providing fair notice.
• Vague submissions: lack of specificity undermines fair notice.
• Missing delivery proof: inability to prove timely receipt weakens the timeliness argument.
• Waiting until after final determination or after filing suit to cure: can forfeit the ability to relate back.
• Signature defects left uncorrected: cure promptly and clearly.
• Fragmented recordkeeping: ensure a single, indexed set of exhibits.

Conclusion

For ERC disputes when the IRS asserts late receipt of a corrected Form 941?X, the informal claim doctrine is a tool that can salvage the ERC claim. A timely writing that gave the IRS fair notice, followed by a proper cure while the claim remained pending, supports treating the ERC claim as timely and processing the refund.

Mr. Shimick is a Partner at Whiteman Osterman & Hanna, LLP, and the leader of the firm’s Federal and State Taxation Practice Group. You can contact him at (518) 487-7678 or by email at sshimick@woh.com.

Disclaimer: This post is for general informational purposes only and is not legal, tax, or accounting advice. Readers should consult their own advisors regarding their specific circumstances.