The Employee Retention Credit has spawned a cottage industry of firms claiming to help businesses access stimulus funds, often in violation of federal

How a Pandemic-Era Program Became a Magnet for Fraud

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2023-05-26 14:30:10

The Employee Retention Credit has spawned a cottage industry of firms claiming to help businesses access stimulus funds, often in violation of federal rules.

Alan Rappeport covers economic policy and the Treasury Department. He has been tracking how pandemic-era stimulus money is being used across the U.S. since 2020.

In early February, federal prosecutors in Utah accused Zachary Bassett and Mason Warr of cheating the United States government out of millions of dollars. The accounting firm they operated had submitted more than 1,000 fraudulent tax forms to the Internal Revenue Service on behalf of businesses trying to claim pandemic-era stimulus funds, the prosecutors said.

COS Accounting and Tax shut down later that month, leaving businesses and taxpayers that had paid the firm to help them claim federal money trying to figure out what had happened and why they were suddenly receiving audit notices from the I.R.S.

Amid the onset of the pandemic in 2020, as large swaths of the economy went into lockdown, Washington set up various programs to help keep businesses and their workers afloat. Among them was the Employee Retention Credit, a tax benefit that was created as part of the initial $2 trillion pandemic relief legislation. The program offered businesses thousands of dollars per employee if they could show that Covid-19 was hurting their bottom lines and that they were continuing to pay workers.

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