The IRS has thrown the ERC world another curveball. For the first time, TaxNow users with claims filed between January 1st and April 15th, 2025, are finally seeing their refunds hit. The bad news? The IRS’ attention to pre-2025 submissions has nearly come to a standstill. With significant vacancies across key IRS leadership positions, it’s unclear whether there is any concrete plan to address the still-substantial backlog of claims, many of which were likely flagged as “high risk” or “unacceptable risk” under the agency’s still-opaque ERC risk-scoring 2024 initiative.
Compounding matters is the surge in correspondence audits. Some ERC experts are now questioning whether the IRS is setting the stage for a repeat of last year’s 105C denial blitz (i.e., mass rejections with little to no explanation). With the agency operating at roughly 75% of its previous workforce, there’s no telling when, or if, responses to the current wave of examinations will receive proper review. Several tax professionals predict that claimants should brace for a flood of denial letters citing “insufficient responses,” similar to those elicited from the Austin-campus correspondence audits in 2024.
We’ll take the wins where we can find them…2025-filed refunds and record-high average payouts are welcome news this week, but it’s hard to ignore the bigger picture. Potentially, hundreds of thousands of pre-2025 claims remain in limbo, thousands of appeal protests are still unassigned with a 2-year clock ticking, and the possibility of future mass denials looms.
Here’s a breakdown of the past week’s processing stats:
📉 Total refunds processed settled in at 238, a slight dip from last week’s measly 248 refunds, marking the lowest week since January 12.
📈 The bright spot of the week was the average refund amount, which hit an all-time TaxNow high of $262,204, up from last week’s $155,912. Given that this week included several refunds in excess of $5 million stemming from a successfully closed audit, it’s worth tempering expectations for future weeks.
📈 Total dollar volume jumped to $62.4M from $38.7M last week, though 25% of the total was made up by 4 refunds, suggesting the data may be skewed by a few outliers.
With 2025 filings now being processed, another record was set by TaxNow for Average Days from Filing to Refund, which dropped to 314 days, the lowest since TaxNow began reporting ERC data in mid-2024.
1. IRS Reopens Doors to Former Staff - The Treasury Department is inviting former IRS employees who participated in the Deferred Resignation Program to rescind their resignations, aiming to fill “critical vacancies” after workforce cuts left the agency down 25%. An August 22nd email surfaced, showing offers going to staff in key areas like the Small Business/Self-Employed Division, signaling a shift after aggressive downsizing under the Trump administration. The IRS is under pressure, facing service delays, a shrinking workforce, and over 15 leadership roles either vacant or filled by acting officials following the abrupt removal of Commissioner Billy Long. Treasury has also approved hiring thousands of seasonal contact representatives ahead of the 2026 filing season in a broader effort to rebuild capacity. For businesses awaiting ERC refunds, this could be encouraging. The ERC backlog, hampered by severe staffing shortages, may see relief as experienced personnel return and new hires come online.
2. Faulkender’s Exit Adds to Turmoil - Treasury Deputy Secretary Michael Faulkender is departing less than five months into the role, furthering upheaval at Treasury and the IRS following Commissioner Billy Long’s recent exit. A key architect of the CARES Act and briefly acting IRS commissioner, Faulkender played a major role in restructuring efforts and has blasted “ERC mills” in the past, urging strict enforcement against fraud while protecting legitimate filers. His departure consolidates control under Treasury Secretary Scott Bessent, leaving questions about whether Faulkender’s previous push for targeted ERC enforcement will continue.
Kenny's Conclusions
While the recent payouts on 2025-filed claims provide a glimmer of progress, the broader picture remains troubling. The IRS is still grappling with severe capacity issues, leadership instability, and a growing enforcement posture that suggests more pain ahead for legacy claimants. Until the agency can meaningfully address its backlog and restore confidence in fair, timely review of pre-2025 claims, businesses should prepare for continued uncertainty. For now, the message is clear: celebrate the small victories, but stay vigilant…this fight isn’t over.
Signing off!
Kenny Dettman, CPA
Disclaimer: *𝘋𝘢𝘵𝘢 𝘴𝘦𝘵 𝘪𝘴 𝘧𝘳𝘰𝘮 𝘢𝘱𝘱𝘳𝘰𝘹𝘪𝘮𝘢𝘵𝘦𝘭𝘺 14,000 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴𝘦𝘴 𝘵𝘳𝘢𝘤𝘬𝘪𝘯𝘨 𝘌𝘙𝘊*
