ERC refunds finally decelerate from an all-time high, while post-January 31, 2024 refunds get put on the chopping block.
📉 After several weeks of impressive volume, ERC refunds took a modest step back. TaxNow’s latest data indicates a still-healthy 1,095 refunds processed this week, down from 1,376 refunds last week,a 20% week-over-week decline. For all the unsung heroes tracking, monitoring, and invoicing - it’s time to catch your breath!
📉 With an even more dramatic decline, the average refund amount dropped to $116,321 this week – a sharp 49% fall following last week’s hefty $231,068. What a difference a week makes!
All eyes are on next week’s batch to see where the winds will take us, while also watching the progress of the House’s draft of the “One Big, Beautiful Bill,” which could retroactively terminate ERC claims filed after January 31, 2024.
1. JCT Scoring Indicates Dramatically Lower Budgetary Impact. Tim Parrish, President of the HIRE Coalition, highlighted in a recent LinkedIn post that the updated JCT score estimates only $6.3 billion in savings from the ERC repeal and enforcement measures—far less than previously claimed. He criticizes the exaggerated reports of widespread fraud, noting that most ERC claims are approved, and warns that retroactive repeal could cause severe financial harm to small businesses and nonprofits, potentially leading to bankruptcies and job losses. Parrish urges Congress to reconsider, remove these provisions, and process pending claims to protect Main Street’s recovery, questioning whether such minimal savings are worth the real-world damage to small businesses.
2. Kevin O’Leary Blasts ERC Provisions in Tax Bill: In a recent appearance on Fox Business' "Varney & Co.," investor and entrepreneur Kevin O'Leary criticized the proposed tax bill, labeling it a "war on small business." He expressed concern over provisions that would grant the IRS extended auditing powers, potentially allowing audits of small businesses for up to nine years, particularly targeting those that utilized the Employee Retention Credit (ERC) during the COVID-19 pandemic. O'Leary argued that such measures are unprecedented and could unjustly penalize businesses that relied on the ERC to survive. He emphasized the need to support small businesses rather than subject them to increased scrutiny and potential financial strain.
3. Taxpayer Advocate Presses IRS to Clear Remaining ERC Claims by Year-End: National Taxpayer Advocate Erin Collins is urging the IRS to process the remaining 597,000 ERC claims by the end of 2025, emphasizing the need for transparency and protection of taxpayer rights. While she acknowledged progress from a backlog of 1.2 million in October 2024, Collins raised concerns over unresolved appeals and the opaque process for contesting disallowances. The IRS halted new ERC claims in 2023 due to concerns over ineligible submissions, causing significant delays for legitimate filers. With IRS staffing cuts and budget threats looming, experts fear the agency may struggle to meet Collins’s year-end goal.
4. Senate to Review Trump’s IRS Nominee Amid Controversy and Looming Staff Cuts: After months of delay, the Senate is set to consider President Trump’s nominee for IRS commissioner, Billy Long, amid criticism over his ties to questionable tax credit schemes. The confirmation hearing follows a period of leadership instability at the IRS, with four acting commissioners since Trump took office. Long's nomination comes as the administration pushes for deep IRS staff cuts—up to 25%—despite concerns over service quality and enforcement. Democrats are raising alarms about Long's associations and the implications of gutting IRS resources, which had only recently been expanded under the Inflation Reduction Act.
Kenny's Conclusions
After weeks of headline-grabbing highs, this week’s ERC refund activity hit the brakes—but the story is far from over. With refund volumes cooling and the average check amounts tumbling, all eyes are now shifting to Congress, where proposed legislation threatens to retroactively eliminate post-January 31, 2024 ERC claims. Critics like Kevin O’Leary and the HIRE Coalition warn that the bill’s fine print could trigger devastating consequences for small businesses. Meanwhile, the IRS faces mounting pressure from the Taxpayer Advocate to clear a massive claims backlog by year-end, while navigating budget cuts, leadership changes, and increasing error rates. The coming weeks will be critical in shaping the future of ERC enforcement, processing, and taxpayer relief. Stay tuned.
Let’s see what next week brings…
Signing off!
Kenny Dettman, CPA
Disclaimer: *𝘋𝘢𝘵𝘢 𝘴𝘦𝘵 𝘪𝘴 𝘧𝘳𝘰𝘮 𝘢𝘱𝘱𝘳𝘰𝘹𝘪𝘮𝘢𝘵𝘦𝘭𝘺 10,000 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴𝘦𝘴 𝘵𝘳𝘢𝘤𝘬𝘪𝘯𝘨 𝘌𝘙𝘊*
