The Internal Revenue Service (IRS) is intensifying its crackdown on fraudulent claims for the pandemic-era Employee Retention Tax Credit (ERTC), as part of a broader effort to prevent the misuse of federal relief programs. In a recent announcement, the agency revealed that it has sent out 28,000 rejection letters to businesses suspected of submitting improper claims, potentially stopping up to $5 billion in fraudulent payments.
The ERTC was established as part of the COVID-19 relief efforts to help businesses retain employees during the economic downturn. However, the program has become a target for abuse, with numerous businesses allegedly filing bogus claims in an attempt to receive unwarranted payouts.
In response to the growing problem, the IRS has opened 460 criminal cases against individuals and organizations suspected of defrauding the program. IRS Commissioner Danny Werfel emphasized the agency’s commitment to rooting out fraud and protecting legitimate businesses that have rightfully benefited from the tax credit.
“We are committed to ensuring that the Employee Retention Tax Credit is used appropriately, and that improper claims are identified and dealt with swiftly,” Commissioner Werfel said in a statement. “This work is crucial not only for the integrity of the program but also for the overall fairness of our tax administration.”
The crackdown comes amid increased scrutiny of pandemic-era relief programs, which, while providing much-needed support to struggling businesses, have also been plagued by instances of fraud. The IRS’s efforts to audit and reject improper ERTC claims are part of a larger strategy to safeguard taxpayer dollars and ensure that relief funds are allocated to those who genuinely need them.
The agency’s actions signal a warning to businesses and individuals considering submitting fraudulent claims. The IRS has made it clear that it will continue to pursue criminal charges and other penalties against those found to be exploiting the system.
As the IRS ramps up its auditing efforts, businesses that have claimed the ERTC are advised to review their submissions and ensure they comply with the program’s guidelines. The agency has also encouraged anyone with information about fraudulent activity related to the ERTC to come forward.
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