As the IRS faces a flood of fake claims for the pandemic-era Employee Retention Tax Credit (ERC), the agency announced Thursday it's taking action to fight abuse of the program — including ramping up civil and criminal investigations and carrying out more audits.
A review that came out in June found an "extremely high rate of improper ERC claims," the IRS said Thursday. In recent weeks, the IRS says it's opened 460 criminal cases against suspected scammers, and sent rejection letters to 28,000 businesses in a move expected to save as much as $5 billion in improper payments.
IRS Commissioner Danny Werfel said, "The Employee Retention Credit is one of the most complex tax provisions ever administered by the IRS, and the agency continues working hard to balance our work to protect taxpayers from improper claims while also making payments to qualifying businesses.
"It has been a time-consuming process to separate valid claims from invalid ones. During the past year, we maintained a steady cadence of both ERC approvals and disapprovals," he added.
The agency noted that it's identified some 50,000 valid ERC claims and says it's working to process those payments in the coming weeks.
The ERC was one of several credits aimed at helping businesses affected by the COVID-19 pandemic, but Senate Finance Committee Chair Ron Wyden, D-Ore., said in January that a whistleblower had told him 95% of those claims were fraudulent.
Information from The Associated Press was used in this report.
Kate McManus ✉
Kate McManus is a New Jersey-based Newsmax writer who's spent more than two decades as a journalist.
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