Over the last several weeks, we had started to see signs of moderate progress in the IRS’s handling of “special situation” claims, including selective 105C reversals, some administrative cleanup, and a slow trickle of correspondence audit resolutions. This week, that progress appears to be deteriorating.
Instead of improving momentum, we continue to hear more about friction in Appeals, difficulty around Form 907 extensions, stalled 105C movement, and only limited closure activity in correspondence audits.
Normal pending ERC claim processing is still virtually non-existent and we continue to wait for positive traction on the PEOfront, despite promising messaging from the IRS in prior weeks.
Here’s how this week compares to last week:
Total Refunds: 78 vs. 115 last week(-37 / -32%)
Total Dollar Volume: $4.97M vs. $7.76M last week ( -$2.79M / -36%)
Average Refund: $63.7K vs. $67.3K last week ( -36.K / -5%)
Denials: 5 vs. 13 (-8 / -62%)
Average Days to Refund: 805
Audits (April): 0
Compared to last week, the pullback is real.
Refund counts fell from 115 to 78. Dollar volume dropped from $7.76M to $4.97M. Average refund size also slipped, though much less sharply than the week before.
That matters because last week’s story was that refund counts held up, but average refund size collapsed, suggesting the IRS was processing smaller-dollar claims and administrative resolutions rather than meaningful backlog inventory.
This week reinforces that same theme, but with an added concern: now even the moderate special-situation progress appears to be losing steam.
Last week, we noted continued movement where some 105C denials were being overturned and converted into refunds, including certain gross receipts cases, administrative-error situations, and select partial suspension claims.
This week, that momentum appears far less visible.
One of the more important recent developments is that practitioners are increasingly describing a system where unresolved ERC claims are colliding with the two-year refund suit deadline, while Form 907 extensions remain inconsistent and difficult to obtain.
As recent reporting noted, taxpayers and practitioners are facing:
That is a major problem for ERC.
Appeals are supposed to function as an off-ramp from litigation. Instead, for many taxpayers, it is starting to look like another bottleneck, and for smaller claims especially, litigation often is not a realistic answer.
That backdrop also creates a useful transition to a broader point: as ERC becomes more delayed, more contested, and more expensive to fight, taxpayers may want to widen the lens on other COVID-period refund opportunities.
That is part of the logic behind PenaltyBack. As described in more detail on our site, PenaltyBack is built around helping taxpayers identify whether the IRS may owe them money tied to COVID-period penalties and interest, and framing that opportunity as a fast, simple refund review.
This week’s data does not suggest that ERC processing has stopped.
It suggests something more nuanced, and in some ways more concerning.
The limited progress we had been seeing on special situations appears to be softening. 105C movement looks stalled. Correspondence audits are still resolving only slowly. And Appeals is increasingly becoming a source of friction rather than resolution.
So while refunds are still moving, the bigger question is no longer just whether the IRS is processing claims, it is whether the IRS is making meaningful progress toward resolving the hardest remaining claims in a way that is coherent, timely, and economically workable for taxpayers.
Disclaimer: *𝘋𝘢𝘵𝘢 𝘴𝘦𝘵 𝘪𝘴 𝘧𝘳𝘰𝘮 𝘢𝘱𝘱𝘳𝘰𝘹𝘪𝘮𝘢𝘵𝘦𝘭𝘺 15,000 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴𝘦𝘴 𝘵𝘳𝘢𝘤𝘬𝘪𝘯𝘨 𝘌𝘙𝘊*
