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

The Employee Retention Credit (ERC) was introduced during the pandemic to aid businesses in retaining employees. However, due to its intricate eligibility rules, it became a target for fraud. The IRS has now reported significant progress in recovering funds that were improperly distributed under this credit.

Small businesses that believed they received the credit in error were given the opportunity to return the money through a voluntary disclosure program. Over 500 taxpayers participated in this program, with 800 submissions still being processed. Additionally, an ongoing program allowed businesses to withdraw unprocessed claims, resulting in 1,800 businesses withdrawing $251 million.

The IRS conducted audits on over 12,000 businesses that filed more than 22,000 improper claims, resulting in $572 million being assessed. IRS Commissioner Danny Werfel expressed concern over the widespread abuse of these claims and emphasized the IRS’s efforts to assist misled businesses.

Although the IRS stopped processing new claims in September, they anticipate resuming processing in the spring. The IRS Criminal Investigation is currently reviewing an additional $3 billion in claims. These initiatives are aimed at recovering funds that were fraudulently obtained and preventing further abuse of the ERC program.

Overall, the IRS’s efforts to recover funds that were improperly distributed under the Employee Retention Credit (ERC) have been successful so far. With ongoing audits and programs aimed at preventing further abuse of this program, we can expect to see even more progress made in recovering funds and ensuring compliance with eligibility rules in the future.

By Samantha Jones

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