IRS Investigates Billions in Perhaps Fraudulent Employee Retention Credit Claims
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The Internal Revenue Service (IRS) is actively investigating a surge in potentially fraudulent claims for the Employee Retention Credit (ERC), a tax credit designed to help businesses retain employees during the COVID-19 pandemic. Investigations initiated by IRS Criminal Examination (CI) in fiscal year 2025 already involve 588 inquiries and over $5.6 billion in questionable claims. This signals a significant crackdown on abuse of the program, which has become a target for scammers.
What is the Employee Retention Credit (ERC)?
The Employee Retention Credit was created under the Coronavirus Aid,Relief,and Economic Security (CARES) Act of 2020. It allowed eligible employers to claim a refundable tax credit for wages paid to employees during periods of significant business disruption due to government orders related to COVID-19, or a significant decline in gross receipts. The rules surrounding eligibility were complex and changed several times, creating opportunities for misinterpretation and fraudulent claims. https://www.irs.gov/credits-deductions/employee-retention-credit
The rise in Fraudulent Claims
While the ERC provided crucial relief to many businesses, it has also attracted widespread fraud.Aggressive marketers have been promoting the ERC to businesses that were likely ineligible, often charging substantial fees for filing claims. The IRS has warned taxpayers to be cautious of such schemes. https://www.irs.gov/newsroom/irs-continues-to-combat-abusive-marketing-of-employee-retention-credit
The recent case involving Jackson, as reported by WSB-TV, is indicative of this larger trend. While details of Jackson’s case were not provided in the source material, it highlights the IRS’s focus on pursuing individuals involved in ERC fraud.
IRS Criminal Investigation Efforts
IRS Criminal Investigation is the law enforcement arm of the IRS.Their work focuses on investigating financial crimes, including tax fraud. The 588 inquiries initiated in fiscal year 2025 represent a substantial increase in ERC-related investigations, demonstrating the IRS’s commitment to combating this type of fraud.
The IRS is urging anyone who believes they may have been misled into filing an incorrect ERC claim to consult with a trusted tax professional. They also encourage reporting suspicious ERC promoters to the IRS.
Key Takeaways
* The IRS is aggressively investigating potentially fraudulent Employee Retention Credit claims.
* Over $5.6 billion in claims are currently under investigation.
* Businesses should be wary of aggressive marketers promoting the ERC.
* Taxpayers who filed incorrect claims should consult a tax professional and consider amending their returns.
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