Employee Retention Credit: Fraud, Abuse, and Heightened IRS Scrutiny

The Employee Retention Credit is a Covid relief program initially promulgated by the CARES Act to help businesses survive the pandemic while keeping their employees on the payroll. As stated on the IRS Website, “When properly claimed, the ERC – also referred to as the Employee Retention Tax Credit or ERTC – is a refundable tax credit designed for businesses that continued paying employees during the COVID-19 pandemic while their business operations were fully or partially suspended due to a government order, or they had a significant decline in gross receipts during the eligibility periods.” Despite the good intentions of Congress, the ERC has been the subject of abuse and fraud. The IRS is scrutinizing pending claims with assistance from the National Fraud Unit and the IRS Criminal investigation Division.