ERC processing is in freefall—five straight weeks of declining refunds culminated in the second-worst refund week since the August 25 moratorium was lifted. The signal from the IRS, whether intentional or not, is alarming: we may be on the cusp of yet another "unofficial" ERC processing moratorium.
With leadership shakeups, key vacancies, and growing rumors that no one at the Service is truly steering ERC decision-making, it’s increasingly likely that front-line employees have been left without clear direction on how to handle the still-substantial inventory of pending claims. At the same time, IRS resources may be shifting away from ERC to focus on the imminent extended business and individual income tax filing deadlines, a puzzling situation considering that earlier this year, ERC processing actually peaked during the original deadlines.
Further corroborating this apparent shift in resources, both denials and audits decreased this past week. But this raises an even bigger concern: who at the Service will be responsible for reviewing the thousands of correspondence audit responses issued in recent months?
With the threat of a government shutdown still looming, businesses awaiting ERC refunds would be wise to prepare contingency plans now, while ERC refund litigation attorneys and ERC advance funding financiers should be gearing up for a spike in volume.
📉 Total refunds plummeted to just 62, another 50%+ drop from last week’s 130, setting yet another new low for 2025 and marking the second lowest week in the past two years.
📉 Average refund amount came back down to earth, leveling out at $158,904, sharply down from last week’s $783,360, driven by a single refund exceeding $50 million
📉 Total dollar volume bottomed out at $9.9M, a mere 11% of last week’s $93.2M in refund dollars, marking yet another annual low.
📈Average days from filing to refund rose for a second week in a row to 527, up from 475 the prior week, suggesting the optimism about the IRS working 2025-filed claims should be tempered immediately.
1. Tribal Credits in the Spotlight Again - The Justice Department has reportedly opened a criminal tax investigation into White River Energy Corp.’s sale of so-called tribal tax credits, which the IRS has publicly stated do not exist. According to Senate Finance Committee ranking member Ron Wyden (D-Ore.), confidential sources confirmed that DOJ and IRS Criminal Investigation began probing the company last year over claims it acquired $64 billion in tribal tax credits. Wyden raised concerns that White River failed to disclose the probe in SEC filings, potentially misleading investors, while also noting links between the credits and former IRS Commissioner Billy Long, who received referral fees tied to the credits before leaving the agency in August. Although White River denies wrongdoing and insists purchasers’ returns have been approved by the IRS, the probe adds to mounting scrutiny from Congress, the SEC, and federal prosecutors over what may prove to be one of the largest tax credit controversies in recent memory.
2. IRS Releases New Guidance for R&D Credits - The IRS has announced more than $162 million in penalties tied to improper claims for credits such as the Fuel Tax Credit and the Sick and Family Leave Credit (often referred to as the “Self-Employment Tax Credit” or “SETC”), many of which were promoted through misleading social media content. More than 32,000 taxpayers have been hit with the $5,000 frivolous filing penalty under IRC § 6702, with many also facing delayed or denied refunds. The Service emphasized that taxpayers should rely on authoritative guidance rather than social media sources and, where necessary, file amended returns or seek qualified tax advice to address any incorrect filings.
Kenny's Conclusions
The ERC landscape remains highly unpredictable, with refund volumes collapsing, enforcement actions shifting, and leadership vacuums fueling uncertainty within the Service. Whether this slowdown proves to be a temporary resource reallocation or the start of a new de facto moratorium, one thing is clear: businesses cannot afford to sit idle.
Claimants should be proactive in monitoring their filings, preparing for protracted delays, and considering legal or financial options to bridge the gap. As Congress, the courts, and the IRS continue to shape and reshape the next chapter of the ERC story, staying informed and prepared will be critical in the months ahead.
Signing off!
Kenny Dettman, CPA
Disclaimer: *𝘋𝘢𝘵𝘢 𝘴𝘦𝘵 𝘪𝘴 𝘧𝘳𝘰𝘮 𝘢𝘱𝘱𝘳𝘰𝘹𝘪𝘮𝘢𝘵𝘦𝘭𝘺 14,000 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴𝘦𝘴 𝘵𝘳𝘢𝘤𝘬𝘪𝘯𝘨 𝘌𝘙𝘊*
