PPP and ERC Fraud Remain Prime Targets for IRS and DOJ Investigations in 2024

Posted in Offshore Account Update on May 17, 2024 | Share

While it has been four years since Congress established the paycheck protection program (PPP) and employee retention credit (ERC) under the CARES Act, pandemic-related fraud remains a prime target for both the Internal Revenue Service (IRS) and the U.S. Department of Justice (DOJ). The IRS’ Criminal Investigation Division (IRS CI) and the DOJ are actively pursuing criminal investigations in 2024, leaving many business owners in need of a highly experienced Washington D.C. tax lawyer.

The risks of facing a criminal PPP fraud or ERC fraud investigation are substantial. These investigations can lead to multiple criminal charges—all carrying the potential for substantial fines and federal imprisonment. Although business owners targeted for PPP or ERC fraud will have opportunities to avoid prosecution in many cases, leveraging these opportunities will require experienced legal representation.

IRS Releases PPP and ERC Fraud Enforcement Data on CARES Act Anniversary

On March 28, 2024—the fourth anniversary of the CARES Act—the IRS issued a News Release highlighting its collaborative efforts with the DOJ to target PPP and ERC fraud. According to the IRS:

  • IRS CI has investigated more than 1,600 pandemic-related fraud cases (consisting primarily of PPP and ERC fraud cases) involving a total of $8.9 billion in taxpayer losses.
  • Of IRS CI’s pandemic-related investigations to date, more than half have been initiated in the past 12 months.
  • Out of 795 people indicted for pandemic-related fraud, 373 have been sentenced to an average of 34 months in federal prison. In prosecuted cases, IRS CI and the DOJ have a 98.5 percent conviction rate.

The IRS’ News Release also makes clear that IRS CI and the DOJ are continuing to prioritize PPP and ERC fraud enforcement. As a result, we expect many more investigations to be forthcoming. For business owners who received PPP loans or claimed the ERC (or both) and who are not yet facing scrutiny, now is the time to ensure that their filings are accurate—and to take remedial action if necessary. While it may not be possible to avoid penalties entirely, the risks of voluntary disclosure can be far less severe than the risks of facing an IRS CI or DOJ investigation.

Responding to a PPP or ERC Fraud Investigation

Once a criminal investigation is underway, the opportunity to submit a voluntary disclosure has passed. In this scenario, targeted business owners must work closely with their counsel to formulate and execute a strategic defense. Whether a business owner’s defense strategy should focus on settling with the federal government or avoiding liability altogether will depend on the circumstances at hand.

Schedule a Confidential Consultation with Washington D.C. Tax Lawyer Kevin E. Thorn

If you need to know more about how to minimize the risks of facing an IRS CI or DOJ investigation for PPP or ERC fraud, we encourage you to contact us promptly. To schedule a confidential consultation with Washington D.C. tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 202-349-4033 or contact us confidentially online today.

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