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IRS and DOJ Investigations Targeting COVID-Era Fraud: What PPP and ERC Recipients in Maryland Need to Know

News, Offshore Account Update

Posted in on May 17, 2024

While the COVID-19  pandemic may be over, the federal government’s efforts to target pandemic-era fraud have only just begun. The Internal Revenue Service (IRS) and U.S. Department of Justice (DOJ) are prioritizing pandemic-related fraud cases in 2024, and their efforts to prosecute individuals for paycheck protection program (PPP) and employee retention credit (ERC) fraud are likely to continue well into the future. Maryland tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what this means for PPP and ERC recipients in the Old Line State:

IRS and DOJ Investigations Targeting PPP and ERC Fraud Present Substantial Risks

While the IRS has the authority to audit taxpayers’ returns, it also routinely works with the DOJ to pursue criminal fraud investigations. The risks of facing a criminal fraud investigation are much greater than the risks of facing a civil audit—with potential penalties including substantial fines and federal imprisonment.

This is especially true when an investigation targets one of the IRS or DOJ’s top law enforcement priorities. Currently, both agencies’ top enforcement priorities include PPP and ERC fraud.

The IRS has made this clear on multiple occasions—most recently when it issued a News Release on the fourth anniversary of the CARES Act  (this was the pandemic-era piece of legislation that established the PPP and ERC). The IRS’ News Release highlights its enforcement efforts to date, and it emphasizes its ongoing efforts to investigate and prosecute PPP and ERC fraud alongside the DOJ.

Multiple Issues Can Create Exposure During a PPP or ERC Fraud Investigation

When conducting PPP and ERC-related investigations, the IRS’ Criminal Investigation Division (IRS CI) and the DOJ are looking for evidence of any and all forms of fraud. This includes (but is by no means limited to) forms of fraud that have already led to prosecution such as:

  • Submitting fraudulent PPP loan applications
  • Fraudulently obtaining one or more PPP loans
  • Fraudulently certifying compliance with the terms of the PPP to obtain loan forgiveness
  • Submitting fraudulent ERC claims
  • Fraudulently obtaining ERC refunds

These allegations—among many others—can lead to a variety of federal criminal charges. To date, we have seen IRS CI and DOJ investigations lead to charges including (but not limited to):

  • Tax evasion
  • Money laundering
  • Conspiracy and attempt
  • Bank fraud
  • Wire and mail fraud

Avoiding Unnecessary Consequences for PPP or ERC Fraud

For taxpayers in Maryland who have concerns about facing scrutiny related to PPP or ERC fraud, the key to avoiding unnecessary consequences is to take action as soon as possible. This is true whether or not IRS CI or the DOJ has initiated a criminal investigation. If you are not yet facing scrutiny, you may be able to submit a voluntary disclosure and settle with the IRS. If you are already under investigation, settling may still be an option (if settling is in your best interests), but you will need to take an informed, strategic and proactive approach to your defense.

Request an Appointment with Maryland Tax Lawyer Kevin E. Thorn

If you need to know more about avoiding unnecessary consequences for PPP or ERC fraud, we encourage you to contact us promptly. To request an appointment with Maryland tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 240-235-5096 or contact us confidentially online today.

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