IRS recovers funds from businesses awarded under fraudulent COVID-era tax credit program

IRS Recovers over $1.1 Billion in Fraudulent Employee Retention Credit Claims

Over $1.1 billion has been recovered by the IRS in its efforts to recover funds that were improperly distributed under the Employee Retention Credit (ERC). The credit, which was intended to help businesses retain employees during pandemic-related shutdowns, unfortunately became a target for fraud due to its complex eligibility rules.

The IRS received $225 million through a voluntary disclosure program that allowed small businesses who believed they received the credit in error to return the money. Over 500 taxpayers participated in this program, with 800 submissions still being processed. Additionally, an ongoing program allowing businesses to withdraw unprocessed claims has resulted in 1,800 businesses withdrawing $251 million.

IRS Commissioner Danny Werfel expressed concern over the widespread abuse of these claims and emphasized the IRS’s efforts to assist misled businesses. The IRS stopped processing new claims in September but anticipates resuming processing in the spring. IRS Criminal Investigation is currently reviewing an additional $3 billion in claims. These initiatives are aimed at recovering funds that were fraudulently obtained and at preventing further abuse of the ERC program.

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