The Employee Retention Credit (ERC), a program created to help struggling small businesses during the pandemic, is just one of several IRS credits fraught with abuse, whether by criminals or well-intended taxpayers who are confused by the rules. IRS Commissioner, Danny Werfel, admits that this credit is one of the most complex tax provisions ever administered by the IRS, and that it is time-consuming for the IRS to sort the valid claims from the invalid claims. Once the IRS made announcements in the fall of 2024 requesting taxpayers’ withdrawal requests for the ERC, more than 7,300 entities withdrew their claims, totaling $677 million, and another 2,600 taxpayers applied for voluntary disclosure in 2024, resulting in $1.09 billion worth of credits disclosed.
As of July 2024, IRS Criminal Investigation opened 460 criminal cases with fraud claims potentially worth nearly $7 billion. Just a few weeks ago, seven people were charged in the largest ERC scheme in the United States, purporting to have unlawfully claimed $44 million in ERC funds and an astonishing $600 million in COVID-19 pandemic relief funds. Each defendant faces up to 20 years in prison if convicted of wire fraud, up to 5 years in prison for conspiracy, and up to three years in prison for aiding and assisting in the preparation of false tax returns.
To read more about ERC fraud and the resulting criminal investigations, click the links below.
