5 Common Allegations in COVID-19 Pandemic Fraud (PPP and ERC Fraud) InvestigationsOffshore Account Update
Posted on September 29, 2023 | Share
The Internal Revenue Service (IRS) and other federal agencies are continuing to target COVID-19 pandemic fraud in 2023. This includes primarily (though not exclusively) fraud under the Paycheck Protection Program (PPP) and Employee Retention Credit (ERC) program. As Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains, allegations in these cases can take a variety of forms—and they can expose targets to civil or criminal prosecution depending on the circumstances involved.
Common Allegations in PPP and ERC Fraud Investigations
When targeted in PPP and ERC fraud investigations, companies, business owners and executives, and other individuals can face a wide range of allegations. Some of the most common allegations include:
1. Applying for a PPP Loan or Claiming the ERC Despite Ineligibility
The IRS and other federal agencies are focusing on identifying companies and individuals who applied for PPP loans or claimed the ERC despite being ineligible to do so. In PPP fraud cases, federal authorities are targeting both successful and unsuccessful loan applicants. Both the PPP and ERC had strict eligibility criteria, and ineligible applicants and claimants can face serious allegations of government program fraud.
2. Calculation Errors When Claiming the ERC or Certifying for PPP Loan Forgiveness
Federal authorities are also focusing on cases involving calculation errors. In ERC fraud cases, this involves claiming a larger credit than the one to which a company is entitled. In PPP fraud cases, it involves improperly certifying for PPP loan forgiveness. To secure loan forgiveness, PPP recipients were required to use their loan proceeds for certain specified purposes, and claiming forgiveness for unauthorized uses of PPP funds also constitutes program fraud.
3. Falsifying Tax Return Data or Supporting Documentation
Several PPP and ERC fraud investigations have focused on applicants and claimants who submitted either false tax returns or false supporting documentation in their efforts to obtain forgivable loans or refundable tax credits. While some of these investigations have targeted scammers, many have targeted legitimate businesses as well.
4. Willfully Defrauding the Federal Government
While unintentional violations of the terms of the PPP and ERC program can expose taxpayers to civil liability, willfully defrauding the federal government can trigger criminal prosecution. The IRS’ Criminal Investigation Division (IRS CI) is actively working with the U.S. Department of Justice (DOJ) to pursue criminal PPP fraud and ERC fraud charges when warranted.
5. Attempting to Mislead Federal Agents or IRS CI Investigators
Companies and individuals targeted in COVID-19 pandemic fraud investigations can also face criminal charges for attempting to mislead federal agents or IRS CI investigators. Under federal law, falsifying or concealing information during an investigation is a crime that carries statutory fines and up to five years of federal imprisonment.
Request a Confidential Consultation with Boston Tax Lawyer Kevin E. Thorn
If you are under investigation for PPP fraud or ERC fraud in Massachusetts (or if you have concerns about possibly facing an investigation), we encourage you to contact us promptly for more information. Call 617-692-2989 or contact us online to request a confidential consultation with Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.