No program is safe from fraud. The article below goes into detail about what the IRS has done and why with the ERC program. Short answer is fraud, and how much their was with the PPP program.
Here is the article:
IRS Boosts Safeguards on Tax Credit to Prevent PPP-Like Fraud
SEPTEMBER 14, 2023
The Internal Revenue Service (IRS) has placed a moratorium on processing new claims for the Employee Retention Credit (ERC), a pandemic-era relief program, aiming to prevent a recurrence of the sort of fraud that happened around the Paycheck Protection Program (PPP).
This decision comes in response to growing concerns about the influx of ineligible claims and aggressive marketing tactics that are putting businesses at financial risk when applying for the ERC, the IRS said in a Thursday (Sept. 14) press release.
IRS Commissioner Danny Werfel has ordered the immediate moratorium on processing new ERC claims, beginning Thursday (Sept. 14) and effective until at least Dec. 31.
The U.S. government incurred tens of billions of dollars in losses due to high volumes of fraud that sullied the pandemic-era PPP, PYMNTS reported in December 2022. Many of the loans distributed by that program were forgivable, but many of the companies receiving them turned out to be fraudulent or ineligible.
With its new measures regarding the ERC, the IRS aims to prevent further abuse of the program and protect honest small business owners from scams that pressure them to apply, according to the press release.
The ERC, also known as the Employee Retention Tax Credit or ERTC, is a refundable tax credit designed to assist businesses that continued paying employees during the COVID-19 pandemic, the release said. It applies to businesses that faced full or partial suspension of operations due to government orders or experienced a significant decline in gross receipts during specific eligibility periods.
However, the complexity of the credit and the passage of time since the program's inception have raised concerns about improper claims, per the release.
While the moratorium is in effect, the IRS will continue to process previously filed ERC claims, according to the press release. However, due to heightened fraud concerns, processing times will be longer. The standard processing goal of 90 days will be extended to 180 days or more, depending on the claim's compliance review or audit requirements. Taxpayers may be asked to provide additional documentation to verify the legitimacy of their claims.