COVID-19 Pandemic Fraud: When Are PPP and ERC Recipients at Risk?

Posted in Offshore Account Update on September 29, 2023 | Share

Due to widespread fraud during the COVID-19 pandemic, federal authorities are continuing to heavily scrutinize Paycheck Protection Program (PPP) loan applicants and businesses that have claimed the Employee Retention Credit (ERC). Allegations of PPP fraud and ERC fraud can pose substantial risks—including the risk of criminal prosecution in some cases. As a result, all entities and individuals targeted in pandemic fraud investigations need to take a proactive approach to their defense, and this starts with engaging a Washington D.C. tax lawyer who has specific experience handling these high-stakes cases.

5 Common Allegations in PPP Fraud and ERC Fraud Investigations

If you (or your company) received a PPP loan or claimed the ERC, are you (or is your company) at risk? Here are five common examples of allegations that can lead to prosecution for PPP fraud or ERC fraud:

1. Applying for a PPP Loan or Claiming the ERC Without Qualifying

Not all companies qualified to receive a PPP loan or a refundable employee retention tax credit during the COVID-19 pandemic. In investigations focusing on eligibility, federal authorities—including IRS Criminal Investigation (IRS CI)—are targeting both successful and unsuccessful PPP loan applicants and companies that claimed refundable tax credits of all sizes.

2. Submitting Falsified Tax Returns or Fraudulent Supporting Documentation

IRS CI and other federal authorities have identified several instances of companies and individuals submitting falsified tax returns and fraudulent supporting documentation when applying for PPP loans, certifying for PPP loan forgiveness and claiming the ERC. As a result, they are continuing to look for these red flags when identifying targets for COVID-19 pandemic fraud investigations.

3. Improperly Calculating Your Company’s Tax Credit or Forgiveness Eligibility

Improperly calculating the ERC or a company’s PPP loan forgiveness eligibility can also lead to federal scrutiny. In these cases, targets can face recoupment liability as well as additional liability for back taxes, interest and penalties.

4. Willfully Defrauding a PPP Lender or the Federal Government

While unintentional calculation errors and other honest mistakes can lead to civil liability for PPP fraud or ERC fraud, companies and individuals accused of willfully defrauding PPP lenders or the federal government can face criminal prosecution. IRS CI routinely announces criminal indictments and plea deals in COVID-19 pandemic fraud cases.

5. Attempting to Mislead Federal Agents Investigating PPP Fraud or ERC Fraud

Regardless of a company’s or individual’s underlying risk exposure, attempting to mislead federal agents during a PPP fraud or ERC fraud investigation can also lead to criminal charges. Under 18 U.S.C. Section 1001, anyone who “falsifies, conceals, or covers up” any information or “makes any materially false, fictitious, or fraudulent statement or representation” can face statutory fines and up to five years of federal prison time.

Contact Washington D.C. Tax Lawyer Kevin E. Thorn Today

If you have concerns about facing civil or criminal penalties for PPP fraud or ERC fraud, we encourage you to contact us promptly for more information. To request a confidential consultation with Washington D.C. tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 202-349-4033 or contact us confidentially online today.

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