Hit by false pandemic-era claims of the Employee Retention Tax Credit (ERC), the IRS said it was stepping up audits and criminal investigations of suspected fraud.
The IRS has sent 28,000 denial notices to businesses in recent weeks, which could prevent “up to $5 billion in fraudulent payments,” the agency said in a statement Thursday. So far, 460 criminal cases have been filed against suspected fraudsters.
“The IRS remains committed to continuing its efforts to resolve this program as Congress considers further steps in the interest of both legitimate businesses and tax administration,” IRS Commissioner Danny Wuerfel said in a statement.
Wurfel said Thursday that even though the program expansion was originally intended as pandemic relief, the IRS is still receiving more than 17,000 ERC applications each week, the same number as in June.
Earlier this year, Senate Finance Committee Chairman Ron Wyden (D-Ore.) said he had heard from an IRS whistleblower that 95 percent of ERC claims were fraudulent.
Despite all the fraud, the IRS says it will begin processing new claims after instituting a grace period.
The IRS previously did not process claims filed after September 14, 2023, but has announced that it will begin processing ERC claims filed between September 14, 2023 and January 31, 2023.
Congress recently considered eliminating the ERC program altogether and using the rescission to fund a popular expansion of the child tax credit, corporate deductions, and a double taxation agreement between the U.S. and Taiwan.
Despite passing the House with broad bipartisan support, Senate Republicans blocked the bill from moving forward last week, calling it tantamount to a “show vote” proposed by Democrats.
The end date of the new grace period coincides with the proposed date for rescinding the credit outlined in the failed child tax credit deal.
Financial fraud linked to unemployment benefit programs established during the pandemic has been a concern among various federal agencies in recent years, with agencies including the Department of Labor and Department of Justice pursuing those who abuse pandemic relief programs.
In 2022, the Department of Labor will have more than 1,000 inspectors. Charged with a crime regarding unemployment insurance fraud since the pandemic began.
