ERC Fraud Investigations

Experienced IRS Criminal Tax Attorney Representing Businesses and Their Owners in ERC Fraud Investigations

Facing federal tax fraud allegations is a serious matter. The Internal Revenue Service’s Criminal Investigation Division (IRS CI) investigates businesses and their owners for a wide range of federal tax law violations, and these investigations can lead to serious criminal charges. Recently, IRS CI has been prioritizing cases involving pandemic-related tax fraud, including fraud related to the employee retention credit (ERC).

Is IRS CI Investigating Your Business (or You Personally) for ERC Fraud?

The CARES Act established the employee retention credit as a form of pandemic relief for qualifying businesses that kept their employees on payroll in 2020 and 2021. However, the ERC (like other pandemic relief programs) quickly became a target for fraud, and many businesses claimed the credit illegally. Due to the ERC’s complex eligibility rules and restrictions—which changed from 2020 to 2021—many businesses also inadvertently claimed credits for which they weren’t eligible.

IRS CI is now investigating businesses of all sizes for ERC fraud. While IRS CI investigations often flow from federal tax audits, they can have other triggers as well.

In most cases, business owners find out that they are under investigation when they receive a letter, search warrant or subpoena from IRS CI. At this point, however, the investigation may already be well underway. IRS CI also subpoenas records from banks and other third parties, interviews third-party witnesses, and uses a variety of other means to uncover ERC fraud. As a result, once you learn that your business is under investigation, it is important that you engage experienced defense counsel promptly.

What to Expect During an ERC Fraud Investigation

When facing an ERC fraud investigation, it is important to know what you can expect during the process. It is also important to know what you can—and should—do to protect your business (and yourself). Here are some key considerations:

  • IRS CI Will Work Quickly to Gather Evidence Through a Variety of Means – IRS CI Special Agents will work quickly to gather evidence of ERC fraud from various sources. Your defense counsel can assist with appropriately responding to search warrants and subpoenas, provide guidance for your business’s executives and employees, and communicate with the Special Agents on your business’s behalf.
  • Lack of Substantiation Will Be Deemed Evidence of Fraud – To avoid allegations of criminal tax fraud, and your business will need to be able to substantiate its ERC claims. The inability to affirmatively prove eligibility and accurate calculation of your business’s employee retention credits will be deemed evidence of fraud.
  • Evidence of ERC Fraud Can Lead to Criminal Prosecution – If IRS CI uncovers evidence of ERC fraud, this will almost certainly lead to criminal prosecution. Criminal tax fraud charges carry substantial fines, and individuals who are implicated in the fraud can face time behind bars.

Request a Confidential Consultation with an IRS Criminal Tax Attorney at Thorn Law Group

If IRS CI is investigating your business for ERC fraud, you should engage experienced defense counsel immediately. Call Kevin E. Thorn, Managing Partner of Thorn Law Group, at 202-349-4033 or contact us online to schedule a confidential consultation at Thorn Law Group.

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