After weeks of near-radio silence from the partially operational IRS, this week brought a blockbuster update: ERC refunds actually moved…and not just a little. With nearly $300 million in total refunds processed across 204 claims at an average clip of $1.5 million per refund, this marks the second most active week since before the moratorium. Whether it’s a temporary surge or the start of a genuine recovery remains to be seen. But in the words of the great Lloyd Christmas, the IRS may have, at least for one week, totally redeemed itself!
In other welcome news, IRS audits and denials seem to have all but vanished.
TaxNow’s completely unverified theory? The IRS recently decided to release “large claims” that had already passed preliminary review but were being held up for secondary review. Considering the already-excessive delays, coupled with the current government shutdown, it seems probable that someone at the IRS with a lick of common sense decided it was no longer appropriate to cage these large refunds with no real plan to actually review and release them.
Whatever the true story is, it’s slightly reassuring to know that common sense may still be alive somewhere inside the IRS. The bad news? If TaxNow’s conjecture is correct, that last week’s refunds were due to an administrative decision affecting “processed but held” refunds, it seems unlikely that we’ll continue to see similar activity in future weeks. We certainly hope we’re wrong, but only time will tell.
📈 Total refunds processed: 204 refunds, up from just 43 last week, marking the largest percentage rebound since ERC processing resumed in 2024. Virtually all refunds exceeded $500k per quarter and were filed pre-January 31, 2024. However, we did observe a few post-January 31 (and even 2025) outliers that didn’t appear bound by the $500k threshold.
📈 Total dollar volume: $297.2 million, a staggering increase from $16.6 million last week, showing a surge in large-dollar approvals and catch-up payments.
📈 Average refund amount: $1.46 million, up from $385k last week. Virtually all refunds under $500k appeared to be reissuances, further corroborating TaxNow’s “large-claim release” theory.
📈 Average days from filing to refund: 701 days, compared to 626 last week, the longest average on record by far. This suggests the IRS could be working through its oldest inventory of large claims.
1. Taxpayer Data Dispute Adds to ERC Industry Scrutiny - A new federal lawsuit has intensified scrutiny around data-handling practices in the ERC industry. Tax Guardian LLC has accused TaxStatus Inc. of retaining and reusing sensitive IRS transcript data for roughly 22,000 taxpayers after their partnership ended, allegedly sharing that information with Innovation Refunds LLC without renewed consent.
Legal experts say such conduct, if proven, could violate the Internal Revenue Code’s confidentiality provisions under Sections 6103, 7213, and 7431. The case underscores the growing compliance and privacy risks that firms working with taxpayer data must face.
At TaxNow, data security and authorizations are treated with the highest level of diligence and care.
2. IRS Layoffs Back On the Table — and Off the Rails - Despite assurances this summer that reductions-in-force were “off the table,” the IRS has now issued more than 1,400 layoff notices, hitting critical HR and IT staff just months before the next filing season. The cuts come on top of a 25% workforce decline this year from early retirements and attrition, raising serious concerns about the agency’s readiness to process returns and maintain taxpayer support.
Employees report confusion, morale issues, and the loss of key personnel needed to train new hires, while furloughs continue to idle teams handling underreported income and practitioner hotlines. As the shutdown drags on, even seasoned IRS insiders describe the environment as “chaos and uncertainty,” with layoffs now compounding an already severe staffing and service crisis.
3. Government Shutdown Enters Week Four - The federal shutdown has now stretched past three weeks, marking one of the longest in modern history. With the Senate deadlocked after eleven failed votes to pass a short-term funding bill, the IRS remains largely paralyzed, operating with less than half its normal workforce and no clear reopening date in sight. While the White House has hinted that a deal could come this week, most insiders remain skeptical.
Kenny's Conclusions
After months of stagnation, it’s refreshing to finally report movement, however fleeting it may be. Whether this surge represents a turning point or just a brief break in the storm remains unclear, but it’s proof that progress is still possible, even inside a half-shuttered agency. For now, we’ll take the win, stay vigilant, and keep tracking the data. As always, TaxNow will continue monitoring ERC refund trends and IRS activity closely, separating rumor from reality as the situation evolves.
Signing off!
Kenny Dettman, CPA
Disclaimer: *𝘋𝘢𝘵𝘢 𝘴𝘦𝘵 𝘪𝘴 𝘧𝘳𝘰𝘮 𝘢𝘱𝘱𝘳𝘰𝘹𝘪𝘮𝘢𝘵𝘦𝘭𝘺 14,000 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴𝘦𝘴 𝘵𝘳𝘢𝘤𝘬𝘪𝘯𝘨 𝘌𝘙𝘊*
