Don't Mess With Taxes

This month, we hit the five-year mark since the COVID-19 global pandemic was declared. Here in the United States, the medical situation has stabilized or gotten better in most states.

Internal Revenue Service law enforcement agents, however, are still dealing with the coronavirus’ tax aftermath.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was designed to help Americans cope with the pandemic’s economic impact. Donald J. Trump signed the $2.2 trillion economic stimulus bill into law on March 27, 2020.

The CARES Act was known primarily for the first round of cash payments sent to individuals and families during the pandemic. It also enhanced unemployment benefits, and created the Paycheck Protection Program (PPP) to help small businesses. Subsequent COVID-related laws, and payments, followed as the pandemic persisted.

Unfortunately, the well-intentioned assistance was abused by some. And the IRS Criminal Investigation unit is still working to bring to justice those involved in criminal COVID activities and recover illegally received funds.

Working through fraudulent COVID cases: The tax agency’s law enforcement arm announced this week that so far it has launched 2,039 tax and money laundering cases related to COVID fraud, with attempted fraud in these cases totaling $10 billion.

These cases include a broad range of criminal activity, including fraudulently obtained loans, credits and payments meant for American workers, families, and small businesses.

As of Feb. 28, 1,028 people have been indicted for their alleged COVID-related crimes, and 569 individuals have been sentenced to an average of 31 months in federal prison. IRS-CI has obtained a 97.4 percent conviction rate in prosecuted COVID fraud cases. Many investigations are ongoing.

“It’s been five years since Congress enacted the CARES Act, and our special agents have used their financial acumen to root out thousands of instances of fraud, waste and abuse tied to CARES Act programs. In the past year alone, our special agents initiated 380 new investigations into COVID fraud,” said IRS-CI Chief Guy Ficco.

“CARES Act fraudsters have no regard for their fellow Americans. In many cases they stole funds and spent them on luxury items ranging from trips to cars – all while businesses who should have received these funds – were floundering due to unprecedented economic hardship.”

CI scrutiny includes ERC claims: As part of its COVID fraud investigations, IRS-CI also has focused on investigating instances of Employee Retention Credit (ERC) fraud.

This refundable tax credit was created to provide relief to certain eligible businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic.

However, the effort ran into trouble when aggressive promoters convinced many businesses that they were eligible to claim the tax help. The crush of filings forced the IRS to halt processing of claims, and revise its review of the filings.

It also turned over egregious ERC incidents to IRS-CI.

As of Feb. 28, IRS-CI had initiated 545 investigations, involving more than $5.6 billion in ERC fraud in tax years, 2020, 2021, 2022, and 2023.

Seventy-five of the 545 investigations have resulted in federal charges. Thus far, 38 defendants in those cases have been convicted, with 18 defendants sentenced to an average of 21 months in prison.

Recent COVID fraud sentencings include prison time for 26 defendants who were convicted for their roles in a multimillion dollar national COVID-19 fraud scheme that involved fraudulent PPP loans for purported janitorial and cleaning services companies.

In another COVID fraud conviction, a Mississippi woman was sentenced to 52 months in prison, and ordered to repay $15.9 million in restitution for mail fraud in connection with falsely claiming the IRS ERC for others.

Public assistance welcomed: As IRS-CI continues its COVID-related investigations, it welcomes public help. If you have information regarding known or suspected fraud tied to the CARES Act, the agents urge you to contact your local IRS-CI field office.

You can find field office information in the unit’s 2023 annual report, starting on page 22. Note especially the interactive map on page 23.

The 2024 report was issued last December, but that document no longer is available at IRS.gov. It’s not clear whether the removal was due to a Department of Government Efficiency (DOGE) directive or a technical issue.

You also might find these items of interest:

• IRS Criminal Investigation’s top 10 cases of 2024
• IRS CI chief discusses his priorities & goals for the division
• IRS-CI chief likens tax law enforcement unit’s recent successes to takedown of Al Capone

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