IRS (and IRS CI) Continue To Target PPP Loan FraudOffshore Account Update
Posted on September 30, 2022 | Share
The federal government has struggled with Paycheck Protection Program (PPP) loan fraud since launching the program at the height of the pandemic in 2020. In addition to fraudulently obtaining loans, federal authorities—including the Internal Revenue Service (IRS) and IRS Criminal Investigations (IRS CI)—are also targeting businesses and individuals for fraudulently obtaining loan forgiveness. The PPP allows loan recipients to self-certify that they meet the program’s forgiveness requirements and avoid repaying their federal funds.
PPP Loan Recipients Must Be Prepared to Show that They “Factually Satisfy” the Conditions for Forgiveness
Recently, the IRS affirmed its ongoing efforts to combat PPP loan fraud, including specifically fraudulent loan forgiveness certifications. In a guidance document published on August 19, 2022, the IRS makes clear:
“If a taxpayer who does not factually satisfy the conditions for a qualifying forgiveness causes its lender to forgive the PPP loan by inaccurately representing that the taxpayer satisfies them, the taxpayer may not exclude the amount of the forgiven loan from gross income . . . .”
In addition to examining PPP loan recipients’ tax filings, the IRS is also encouraging individuals who have information about PPP loan certification fraud to come forward. PPP loan recipients can expect to have their 2022 tax returns scrutinized by the IRS, and they must be prepared to affirmatively demonstrate that they “factually satisfy” the conditions for loan forgiveness.
IRS CI Continues to Prosecute Taxpayers for PPP Fraud
Along with the potential for an IRS audit, PPP loan recipients are also at risk of facing scrutiny from IRS CI. IRS CI investigates individual and corporate taxpayers for suspected criminal violations of the Internal Revenue Code and other applicable federal laws, and it refers cases to the U.S. Department of Justice (DOJ) for criminal prosecution when warranted.
Since 2020, IRS CI has regularly published press releases announcing the prosecution of PPP loan recipients. Some examples of recent cases include:
- September 26, 2022 – A woman pleaded guilty to multiple federal crimes after admitting that she fraudulently obtained more than $1 million under the PPP and Economic Injury Disaster Loan (EIDL) program. According to IRS CI, the woman submitted loan applications on behalf of two “purported businesses,” using fabricated tax returns and employment records.
- September 15, 2022 – A federal court sentenced a man to restitution, 10 months in prison and three years of supervised release for fraudulently obtaining PPP and EIDL loans totaling $40,833. A joint investigation by IRS CI and the Federal Bureau of Investigation (FBI) uncovered evidence that the man had “misrepresented his income as a sole proprietor” and submitted false tax documents in support of his loan applications.
- August 31, 2022 – A federal court sentenced a woman to 31 months in prison for submitting 15 fraudulent PPP and EIDL loan applications on behalf of herself and others. According to IRS CI, the applications included various fabrications, including false claims that some of the businesses in question were in operation at the start of the COVID-19 pandemic.
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Tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, represents individual and corporate taxpayers in all IRS and IRS CI matters. To arrange a confidential consultation as soon as possible, please call 617-692-2989, email firstname.lastname@example.org or contact us online today.