The IRS is “Intensifying Audits” Focused on ERC Fraud

The Internal Revenue Service (IRS) is continuing to prioritize Employee Retention Credit (ERC) fraud in Massachusetts and other states across the country. On August 8, 2024, the IRS issued another News Release highlighting its ERC enforcement efforts, with this one noting that the agency is “intensifying audits” focused on uncovering fraudulent ERC claims. Learn more from Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.

The IRS is Working to Balance Businesses’ Needs with ERC Fraud Enforcement

In its most recent News Release, the IRS states that it is attempting to balance businesses’ needs with protecting taxpayers’ interests by simultaneously focusing on processing valid ERC claims and aggressively pursuing ERC fraud enforcement. Ultimately, however, the IRS’ primary focus appears to be on evaluating and enforcing compliance, as it is “moving methodically and deliberately on both the disallowances as well as additional payments.” While this means that some businesses in Massachusetts are finally receiving long-awaited ERC refunds, it also means that many businesses are coming under scrutiny for ERC fraud.

While previous News Releases have touted the IRS’ ongoing efforts to ramp up ERC fraud enforcement, the IRS’ August 8 News Release states that the agency is both “intensifying audits” and “pursuing civil and criminal investigations of potential fraud and abuse.” The News Release states that the IRS recently issued 28,000 disallowance letters to businesses suspected of submitting fraudulent claims, and it also states that thousands of audits are underway.

What Business Owners in Massachusetts Need to Know

As we have discussed previously, at this point, essentially all businesses that have submitted ERC claims to the IRS should reevaluate their claims to assess their propriety. With the IRS both examining paid claims and evaluating pending claims for potential payment, its enforcement net is extremely wide in scope. While businesses that received improper ERC refunds may be liable to repay their refunds (and may be at risk for other penalties), simply submitting an improper ERC claim is enough to expose businesses—and their owners—to civil or criminal enforcement.

With this in mind, here is what business owners in Massachusetts need to know:

• If Your Business Received an ERC Refund – If your business received an ERC refund, you should reassess your business’s eligibility to determine whether all or any portion of the refund needs to be repaid.
• If Your Business’s ERC Claim is Still Pending – If your business’s ERC claim is still pending, you should reassess your business’s eligibility in this scenario as well, and you should proactively address any concerns before they trigger scrutiny from the IRS.
• If the IRS Has Initiated an ERC Audit or Investigation – If the IRS is already scrutinizing your business’s ERC claim, you should seek representation from an experienced Boston tax lawyer as soon as possible.

Request a Confidential Consultation with Boston Tax Lawyer Kevin E. Thorn

If you have questions or concerns about facing ERC-related scrutiny from the IRS, we encourage you to contact us promptly. To request a confidential consultation with Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 617-692-2989 or inquire online today.