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Surprise, There Was a Lot of COVID Relief Fraud

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The IRS has announced via press release that Criminal Investigation (CI) has been busy investigating what could end up being almost $9 billion of fraud related to various COVID measures introduced four years ago. The announcement comes days after the IRS ended the Voluntary Disclosure Program that allowed ineligible businesses to repay claimed Employee Retention Credit (ERC) without penalty as long as the business reveals who pushed them to claim ERC in the first place. The IRS warned against “wildly aggressive suggestions from marketers urging businesses to submit the [ERC] claim” in September when it abruptly stopped processing ERC claims due to “rising concerns about a flood of improper claims.” ERC was part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted on March 27, 2020.

The two cases mentioned in the IRS press release today involve millions of dollars of fraudulent Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program (EIDL) claims:

As for the ongoing investigations:

Four years after the enactment of a key pandemic-era law, the Internal Revenue Service released updated numbers showing Criminal Investigation (CI) has investigated 1,644 tax and money laundering cases related to COVID fraud potentially totaling $8.9 billion, with well over half that amount coming from cases opened in the last year.

These cases include a wide range of criminal activity, including fraudulently obtained loans, credits and payments meant for American workers, families and small businesses under the Coronavirus Aid, Relief and Economic Security (CARES) Act.

As of Feb. 29, 795 people have been indicted for their alleged COVID-related crimes and 373 individuals have been sentenced to an average of 34 months in federal prison. During the last four years, CI has obtained a 98.5% conviction rate in prosecuted COVID fraud cases.

As far as we’re aware there haven’t been any ERC cases prosecuted yet but you best believe they’re coming.

3 thoughts on “Surprise, There Was a Lot of COVID Relief Fraud

  1. The original budget for the Employee Retention Credit was $55billion. The last number I saw was $230billion and rising. I believe that if an honest accounting of this credit is ever done it will prove to the the largest fraud in history. CPAs were thrown under the bus as a marketing tactic and the AICPA did nothing except remind US of our obligations under Circular 130. I really hope they keep pushing this because a lot of people belong in jail.

  2. The ERC credit was a disaster waiting to happen. Some of the criteria were vague. The law was amended two or three times.
    ERC mills were formed and told companies they qualified for ERC in eight minutes! I heard hundreds of their ads on the radio.
    I looked at the ERC for some companies. Only about one third qualified for it of the claims I saw.
    I await seeing who the IRS prosecutes for fraud.
    If it prosecutes anyone, it should be the ERC mill operators.

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