(DailyDig.com) – During a review detailing the claims submitted for the Employee Retention Credit (ERC) that the Internal Revenue Service (IRS) offered to workers during the pandemic, they found that a majority of the claims were fraudulent, according to the IRS.
The IRS reported on June 20 that they found between 10 and 20 percent of claims were at the highest risk of being false. Additionally, the IRS deemed between 60 and 70 percent of the claims were unacceptably false.
Businesses that were labeled non-essential and shut down in 2020-2021 were offered the ERC. Businesses that experienced a specific reduction in gross receipts within the timeframe, as stated in the ERC qualifications, were eligible. Businesses would also qualify for credit if they met the definition of a recovery startup during the last months of 2021.
As the review continued, it became clear that scammers were using the ERC to siphon off taxpayer funds intended for qualified businesses. The scammers attempted to fake the identity of an organization filing for businesses, who were often not aware of the claims.
In March 2023, the IRS issued a warning against fraudulent claims to individuals who were not eligible. Then, in September 2023, the IRS ceased processing any claims due to the evidence of enormous amounts of improper claims. The agency stated in March 2024 that they had recovered one billion dollars in payouts that were due to invalid claims. Currently, the recovered amount is worth two billion dollars.
The review result showed that between 10 and 20 percent of all the ERC claims the IRS received are in the risk group labeled as low. Danny Werfel, the commissioner for the IRS, stated that they will use the results of the review to deny the false claims in the billions of dollars. They will also work to process the claims that are legitimate and issue the proper payments to the eligible workers.
By May 2024, the IRS had proceeded to initiate criminal cases, 450 of which would have seen payments of almost seven billion dollars of taxpayers’ money.
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