After two rough weeks of sagging volume and sky-high audit activity, this week brought a glint of stability to the ERC landscape. While we're still far from "rebound" territory, the latest numbers show encouraging overall growth across major indicators. Though TaxNow only has a limited number of PEOs using our platform, we’re continuing to hear good news trickling through the PEO grapevine regarding ERC processing!
Here’s how the week went:
📉 Refunds processed held steady at 340, virtually flat from last week’s 345, and a welcome break from the sharp declines we’ve seen in recent weeks.
📈 The average refund amount surged to $169,217, up from $139,781, the highest we’ve seen since early June. Seven-figure checks continue to show up in notable numbers, boosting confidence in the size and legitimacy of recent approvals.
📈 Total dollar volume climbed to $57.2M, up from $48.2M. This is the strongest total in the past 3 weeks, fueled by a mix of stable volume and rising average payouts.
While the audit environment remains intense (total audit codes jumped from 153 to 215), this week’s data shows the IRS isn’t totally ignoring the still-meaningful queue of pending ERC claims. It’s not a breakout week, but after July’s sluggish start, this kind of quiet strength is a win in itself.
1. IRS Commissioner Scraps Direct File, Shifts Focus to Audit Transparency Tech - IRS Commissioner Billy Long announced that the Direct File program is “gone,” signaling a sharp shift from Biden-era initiatives toward audit-focused technology. Instead of continuing the free filing pilot, Long said the IRS will prioritize improving transparency in audits, allowing taxpayers to track audit progress and view key details online. This pivot comes amid major staffing changes and anticipated budget cuts, with Long emphasizing the role of veteran IRS employees in implementing new tax laws effectively. A Treasury-led task force will now explore alternatives to Direct File through public-private partnerships, though the original program has lost most of its workforce.
2. Top IRS Officials Placed on Leave Amid Internal Conduct Probe - Two senior IRS officials, Holly Paz, head of the Large Business and International Division, and Elizabeth Kastenberg, acting director of the Office of Professional Responsibility, were placed on administrative leave pending an investigation into alleged conduct toward Republicans. The move comes during a period of major upheaval at the agency, following Billy Long’s recent appointment as commissioner and widespread leadership turnover. Together, Paz and Kastenberg oversaw enforcement on large corporations and regulation of tax professionals. While the IRS has not commented publicly, no replacements have been named, and the investigation remains ongoing. It is unclear how these departures might impact ERC appeals.
Kenny's Conclusions
As the summer grinds on, the ERC world continues to operate in a state of cautious watchfulness. While this week’s uptick in average refund size and total dollar volume offers a glimmer of optimism, the persistent decline in refund counts and the surge in audit activity serve as a reminder that we're not out of the woods. With July now holding the record for IRS ERC examinations, and leadership shakeups continuing to ripple through the IRS, the uncertainty surrounding ERC claim resolution remains high. Still, signs of life, especially among PEOs, suggest there’s forward movement under the surface. For now, we’ll take the wins where we can and keep a close eye on the road ahead.
Signing off!
Kenny Dettman, CPA
Disclaimer: *𝘋𝘢𝘵𝘢 𝘴𝘦𝘵 𝘪𝘴 𝘧𝘳𝘰𝘮 𝘢𝘱𝘱𝘳𝘰𝘹𝘪𝘮𝘢𝘵𝘦𝘭𝘺 14,000 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴𝘦𝘴 𝘵𝘳𝘢𝘤𝘬𝘪𝘯𝘨 𝘌𝘙𝘊*
