While ERC refund processing slowly creeps back up to more exciting levels, ERC-related headlines continue to garner significant attention across small businesses and the ERC industry.
→ Big, Beautiful Bill News: While we rejoiced last week in the wake of news that the House struck all ERC language from their version of the Big Beautiful Bill Act (BBBA), the Senate put a slight damper on the situation by introducing provisions that would seek to replicate much of the previous House version, but limit the early termination and promoter provisions to the third and fourth quarters of 2021. More details below in “Fresh Off the Press.”
→ Big, Beautiful Billy is Formally Confirmed: Billy Long is now officially the IRS Commissioner. From both an ERC and non-ERC perspective, taxpayers and tax professionals are eager to see what early impacts are made by Commissioner Long as he transitions into his new role.
Now back to refunds…
The ERC refund train picked up some moderate speed with more claims processed this week. While the number of checks going out is increasing, they continue to diminish in size, suggesting the IRS may be continuing to focus more on smaller claims.
📈 Our latest TaxNow data shows that refunds processed jumped to 712, a sharp rise from last week’s 443. That’s a 61% increase, marking the highest weekly count in four weeks – a hint that the IRS might be picking up the pace.
📉 However, average refund amount dropped again, landing at $131,706, down from the previous week’s $139,308. This marks the fifth consecutive dip, reinforcing the trend: smaller claims are leading the line.
📈 Another win for this week, though, as the total dollar volume surged to $93.8M from $61.7M – a major jump that shows momentum is building. Now, isn’t that something to celebrate?
1. Republican Tax Talks Heat Up as Senate Bill Lands with Friction - Senate Republicans unveiled their version of the reconciliation tax bill on June 16, but lawmakers from both chambers expect substantial changes before it advances. The Senate draft softened or removed several controversial House provisions, such as limitations on sports franchise amortization and steep tax measures. However, internal GOP divisions remain, with opposition over issues like the SALT cap, clean energy credits, and Medicaid cuts. Senate leaders are working toward a July 4 deadline, but many acknowledge that reaching consensus may take longer due to ongoing negotiations. Meanwhile, Senate Democrats are unified in their opposition, warning the bill benefits the wealthy and risks vital services for working families.
2. Senate Draft Brings Partial ERC Crackdown: Retroactive Limits, Extended Audits, and Promoter Scrutiny Limited to Q3 & Q4 2021 - The Senate's draft tax bill introduces ERC provisions that would retroactively deny claims for Q3 and Q4 of 2021 if filed after January 31, 2024. Claims for earlier quarters—from Q2 2020 through Q2 2021—would not be impacted. The bill also extends the statute of limitations to six years for Q3 and Q4 2021 claims, giving the IRS more time to pursue enforcement. It imposes new due diligence requirements on ERC promoters, but only for those two quarters, with promoter status determined solely by revenue tied to those claims. Notably, the bill includes no new promoter reporting requirements or enhanced penalties under section 6701.
3. Justice Department to Disband Tax Division Amid Workforce Cuts - The Justice Department plans to eliminate its dedicated tTax dDivision, shifting enforcement responsibilities to the cCriminal and cCivil dDivisions as part of a major reorganization. This change is detailed in the DOJ’s fiscal year 2025 budget request, which also proposes cutting over 5,000 positions department-wide. Despite a modest funding increase for the civil and criminal units, both are expected to reduce their number of attorneys. The plan to reassign tax attorneys to U.S. Attorney’s offices faced strong criticism from former DOJ and IRS officials, who warned it would harm tax enforcement. The department’s chief tax official resigned earlier this year in protest of the forced transfers linked to the reorganization. The fate of ERC claims that are currently in refund litigation remains highly uncertain due to the possibility that currently assigned DOJ attorneys may be cut in relation to these new plans.
Kenny's Conclusions
As we head deeper into the summer, it’s clear that the ERC landscape remains as dynamic. Refund trends are showing renewed momentum, while regulatory uncertainty continues to cast a long shadow.
With Commissioner Long now officially at the helm of the IRS, and the Senate’s tax bill in flux, we’ll be watching closely to see what shifts take shape in the coming weeks. For now, patience and vigilance remain the name of the game for both taxpayers and practitioners alike.
Stay tuned. We’ll be back next week with the latest!
Signing off!
Kenny Dettman, CPA
Disclaimer: *𝘋𝘢𝘵𝘢 𝘴𝘦𝘵 𝘪𝘴 𝘧𝘳𝘰𝘮 𝘢𝘱𝘱𝘳𝘰𝘹𝘪𝘮𝘢𝘵𝘦𝘭𝘺 12,500 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴𝘦𝘴 𝘵𝘳𝘢𝘤𝘬𝘪𝘯𝘨 𝘌𝘙𝘊*
