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A Peace Offering To The Fraudsters

A Peace Offering To The Fraudsters

Russian hacker hacking the server in the dark
Senior Director of Strategic Alliances
LexisNexis Risk Solutions - Government

In September of 2023, the U.S government announced a moratorium on processing tax returns that claimed the Employee Retention Tax Credit (ERC). Not to be confused with a mortuary. The ERC is not dead. It was just hemorrhaging in fraud. Congress created the ERC to encourage employers to keep workers on their payrolls during the pandemic. But like all COVID-19 relief programs, a huge chunk of the funds dedicated to the ERC have been victim to fraud. Yet in the pile of more than one million pending claims that have been stopped due to the moratorium, there are some legitimate claims. Claims made by employers who are counting on that money to survive.

Since last September, the IRS has been analyzing its pile of claims and trying to find a way to decide which ones to pay and which to reject. Decisions, decisions, decisions. During this time, the IRS has let taxpayers withdraw unpaid claims, increased audits, started criminal investigations and created a voluntary disclosure program so employers can give back money they don’t think they deserve. It’s a peace offering to the fraudsters. And calm before the storm. In the coming weeks, the IRS plans to deny tens of thousands of claims. About 60% to 70% of the one million pending claims it reviewed carry unacceptable risk, while 10% to 20% fall into the highest risk category, the agency said. Does that mean not even 30% are legitimate claims?

Shout out to the Internal Revenue Service. The backlog of unprocessed ERC claims had swelled to 1.4 million by mid-May. Since the moratorium started, the IRS had processed 28,000 claims totaling $2.2 billion and disallowed more than 14,000 claims worth more than $1 billion.

Today’s Fraud of The Day is based on article “IRS to Reject Billions of Dollars in Covid Employer Tax-Credit Claims” published by the Wall Street Journal on June 20, 2024.

The Internal Revenue Service is planning to deny billions of dollars of what it says are improper claims for a popular pandemic-era tax credit, while starting to gradually pay out some claims that have been sitting at the tax agency for more than nine months.

The IRS, following a long review of the employee retention tax credit, plans to maintain a moratorium on processing claims filed since mid-September 2023. The agency, which had said it hoped to resume significant processing of claims in late spring, announced its plans less than an hour before the summer solstice.

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