As winter tightens its grip, ERC activity is showing clear signs of a seasonal slowdown and an approaching IRS “hibernation.” Refund volume cooled meaningfully this week, with 101 total refunds issued, down sharply from 201 last week (-100 WoW). Total dollar volume pushed slightly north, landing at approximately $38.4M, compared to $30.7M last week, driven by a sharp rebound in average refund size.
Despite fewer refunds overall, the average refund jumped to $380,346, up materially from $152,663 last week, signaling that a handful of larger claims broke through before year-end system constraints set in.
However, with the holidays approaching, broader momentum is clearly decelerating as we approach the IRS’s annual systems shutdown, which typically occurs at the end of this week. Historically, this year-end systems reset lasts roughly 3–4 weeks, during which refund processing often slows dramatically or pauses altogether. While we still expect some refunds next week, activity may fade quickly thereafter into what could resemble a mini-moratorium through much of January.
On the enforcement side, denials dropped to 27 this week, down from 47 last week, reinforcing the view that recent OBBBA-related denial waves may be working through in batches rather than continuously. Notably, we are beginning to observe very limited movement on previously issued ERC denials, including both partial and full denials being actively processed, an important development worth watching closely.
Audit activity also ticked ever-so-slightly higher, with 11 audits opened in December, including 6 incremental audits this week, signaling that enforcement remains selective but persistent heading into year-end.
📉 Total Refunds: 101 (vs. 201 last week — down 100)
💵 Total Dollar Volume: ~$38.4M (vs. $30.7M last week — up ~$7.7M)
📈 Average Refund: $380,346 (vs. $152,663 last week — up $227,683)
📆 Average Days From Filing to Refund: 509 (vs. 622 last week — down 113 days)
📉 New Denials: 27 (vs. 47 last week — down 20) 🔍 Audits: 11 in December (6 incremental this week)
TaxNow's Take:
This week’s data feels like the calm before the freeze. While overall refund volume fell sharply, the surge in average refund size suggests the IRS pushed through a limited number of larger claims ahead of its year-end systems shutdown.
With the IRS entering its annual systems reset and operational slowdown, we expect near-term volatility, a small window for refunds next week, followed by a likely lull through much of January. Importantly, the early signs of denial processing, even at low volume, could mark the beginning of a new phase in ERC administration once systems come back online.
Bottom line: winter is here, refunds are slowing, and the IRS is heading into hibernation. Spring thaw will come, but patience will be required.
Signing off!
Kenny Dettman, CPA
Disclaimer: *𝘋𝘢𝘵𝘢 𝘴𝘦𝘵 𝘪𝘴 𝘧𝘳𝘰𝘮 𝘢𝘱𝘱𝘳𝘰𝘹𝘪𝘮𝘢𝘵𝘦𝘭𝘺 15,000 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴𝘦𝘴 𝘵𝘳𝘢𝘤𝘬𝘪𝘯𝘨 𝘌𝘙𝘊*
