IRS freezes new applications for the Employee Retention Credit for employees kept on during the COVID lockdown
The constant stream of ads for firms telling employers they can collect $26K from the feds for every employee they kept on during the unnecessary COVID lockdown is disappearing from the talk radio and cable news stations I favor. Alan Rappaport reports in the New York Times:
The Internal Revenue Service said on Thursday that it was freezing a pandemic-era employer tax benefit that has been a magnet for fraud and has cost the federal government billions of dollars as the agency looks for ways to stop the program from being abused.
The tax collector also said it had referred thousands of claims for the so-called Employee Retention Credit [ERC —TL] for audits and had initiated over 250 criminal investigations involving nearly $3 billion in potentially fraudulent claims.
The moratorium on new claims underscores the high level of alarm within the I.R.S. that the tax credit has been misused and abused. Top I.R.S. officials have warned that the program is being exploited by unscrupulous "tax mills" — accounting firms and other companies that aggressively lure taxpayers who are not eligible for refunds to submit applications anyway. Many of these companies receive either commissions for submitting applications or a percentage of the refund and have been relying on faulty interpretations of the rules of the program to convince small business owners that they have a chance to get free money.
The Covid panic was engineered (remember Fauci changing his tune on whether masks were necessary?) to justify changes in election rules necessary to steal the 2020 election from Trump. But the economic consequences were so severe that deficit spending to pump money into the economy was a no brainer for many members of Congress from both parties. Hastily-created programs to quickly hand out hundreds of billions of dollars (funded by the national debt) was an open invitation to fraud. One that was widely responded to positively by many segments of the populace:
Maryland's U.S. attorney found a big connection between violent crime and COVID-19 pandemic fraud.
Maryland U.S. Attorney Erek Barron told the 11 News I-Team that his office found that 60% of violent criminals are also committing some type of COVID-19 fraud, and because of that, his office investigates every single violent crime target to see whether they've committed pandemic fraud.
Barron told the I-Team that the 20% reduction in homicides and the 10% reduction in nonfatal shootings in Baltimore City can both be explained by his office prosecuting COVID-19 fraud. Barron said that if his office can't lock up violent offenders for those crimes, there's a good chance his office can prosecute them for pandemic fraud.
The ERC has turned out to be an open spigot from the Treasury to companies claiming it.
In 2021, after Congress expanded eligibility, the Congressional Budget Office projected that the credit would cost the federal government about $85 billion over a decade — up from an earlier estimate of $55 billion. The I.R.S. said on Thursday that it had already paid out about $230 billion in refunds associated with the tax credit and had a backlog of 600,000 claims.
Nearly a quarter-trillion dollars, not the initial $55-billion estimate used to sell the plan to Congress, is starting to be big enough to embarrass the Democrats going into 2024. (Why anyone grants credibility to CBO cost estimates is a separate question.) When that backlog of 600,000 cases is settled, the total could be much, much larger than a mere quarter-trill — unless, that is, fraudulent claims are denied and clawed back.
There are 87,000 new IRS employees coming to work. Maybe some of them can be diverted from auditing conservatives to pursuing fraud in the ERC program.
In the meantime, new advertisers are going to need to be found for many conservative media outlets.