IRS Recovers Funds From Fraudulent COVID Tax Credit Program

Despite the IRS’s efforts to reclaim improperly distributed funds through the Employee Retention Credit (ERC), the program intended to help businesses keep employees during pandemic shutdowns was exploited by scammers due to its complex eligibility rules. Its complex eligibility rules allowed scammers to target small businesses, offering help applying for the ERC for a fee — even if they didn’t qualify. However, the IRS has reported progress in its initiatives aimed at recovering the misallocated funds, underscoring the vital role of tax lawyer expertise in navigating these challenges.

With the voluntary disclosure program concluding on March 22, the IRS received $225 million. This initiative permitted small businesses to return funds they believed were mistakenly received via the Employee Retention Credit (ERC), allowing them to retain 20% of the refunded amount. Participation in the program was substantial, with over 500 taxpayers taking part, while an additional 800 submissions are still undergoing processing by the IRS.

IRS Commissioner Danny Werfel expressed both concern and encouragement regarding initiatives aimed at assisting misled businesses. An ongoing program enables small businesses to withdraw unprocessed claims, leading to 1,800 businesses withdrawing $251 million worth of claims. Moreover, the IRS conducted audits on over 12,000 businesses that filed more than 22,000 improper claims, resulting in assessments totaling $572 million. Werfel highlighted the widespread abuse of these claims, which has adversely affected small businesses, demonstrating the critical need for guidance from tax lawyers well-versed in relevant practice areas.

Although the IRS halted the processing of new claims in September, it indicated a probable resumption of processing sometime this spring. Additionally, IRS Criminal Investigation is currently reviewing an extra $3 billion in claims.

Contact us at Silver Law, PLC for expert assistance with any IRS-related matters. Get in touch with us now to partner with experienced professionals who are dedicated to protecting your business interests.

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