Understanding How the IRS Can Prove PPP or ERC Fraud in 2026

The Internal Revenue Service (IRS) is continuing to successfully pursue audits and investigations targeting pandemic-era fraud in 2026. This includes fraud under the Paycheck Protection Program (PPP) and Employee Retention Credit (ERC) program. Learn how the IRS is proving PPP and ERC fraud in 2026—and what targeted businesses and individuals can do to protect themselves—from Maryland criminal tax lawyer Kevin E. Thorn, Managing Partner of U.S. International Tax Advisors:

How the IRS is Targeting U.S. Taxpayers for PPP and ERC Fraud

The IRS is targeting PPP and ERC fraud through several means. While many audits and investigations are triggered by automated reviews of businesses’ and individuals’ loan applications and tax returns, the IRS is also gathering evidence of fraud through means such as:

• Direct Examination of Suspect Filings – When an automated review, a referral from another agency, or information from another source raises red flags, revenue agents directly review the taxpayer’s filings for signs of fraud.  
• Comparison of Multiple Filings – When taxpayers have submitted multiple PPP or ERC filings, revenue agents also compare taxpayers’ filings to identify inconsistencies that may indicate fraud.
• Comparison of Taxpayers’ Filings with Their Financial and Payroll Records – By conducting audits and investigations, the IRS can compare taxpayers’ PPP and ERC filings with their financial and payroll records to identify evidence of fraud.
• Forensic Examination of Taxpayers’ Records – The IRS also uses sophisticated forensic techniques (including computer forensics and forensic accounting) to find evidence to substantiate allegations of PPP or ERC fraud.
• Field Audits, Search Warrants and Subpoenas – Field audits and search warrants provide the IRS with direct access to taxpayers’ hardcopy and electronic records, while subpoenas compel taxpayers to produce records and provide oral testimony under oath.

These are just examples. The IRS gathers evidence of PPP and ERC fraud through various other means. When revenue agents uncover evidence of fraud, the IRS can either impose civil penalties directly or, in cases of intentional fraud, it can work with the U.S. Department of Justice (DOJ) to pursue criminal charges.

How Targeted Taxpayers Can Protect Themselves During Audits and Investigations

For taxpayers facing PPP- or ERC-related scrutiny from the IRS, avoiding unnecessary consequences starts with understanding what evidence the IRS already has and conducting a comprehensive assessment of the taxpayer’s potential civil or criminal exposure. With this information in hand, taxpayers can then shift their focus to formulating and executing a strategic defense. Depending on the circumstances, this may involve working to close the audit or investigation without additional liability, or targeting a settlement that mitigates the consequences of a past mistake.

Learn More from Maryland Criminal Tax Lawyer Kevin E. Thorn

Maryland criminal tax lawyer Kevin E. Thorn, Managing Partner of U.S. International Tax Advisors, represents individuals and businesses that are facing high-risk IRS audits and investigations. If you need to know more about defending against potential civil or criminal liability for PPP or ERC fraud, call 240-235-5096 or contact us confidentially online to arrange a confidential consultation.