“The IRS Commissioner confirmed to senators that an estimated 95% of claims for the employee retention tax credit are fraudulent. The program, initially costing $55 billion, has surged to nearly five times that amount,” reports the Associated Press. Most of the fraudulent payments will never be recovered:
When IRS Commissioner Danny Werfel met privately with senators recently, the chairman of the Senate Finance Committee asked for his assessment of a startling report: A whistleblower estimated that 95% of claims now being made by businesses for a COVID-era tax break were fraudulent.
“He looked at his shoes and he basically said, ‘Yeah,’” recalled the lawmaker who posed that question, Sen. Ron Wyden, D-Ore.
The answer explains why Congress is racing to wind down what is known as the employee retention tax credit. Congress established the program during the coronavirus pandemic as an incentive for businesses to keep workers on the payroll.
Demand for the credit soared as Congress extended the tax break and made it available to more companies. Aggressive marketers dangled the prospect of enormous refunds to business owners if they would just apply. As a result, what was expected to cost the federal government $55 billion has instead ballooned to nearly five times that amount as of July. Meanwhile, new claims are still pouring into the IRS each week, ensuring a growing price tag that lawmakers are anxious to cap.
The Joint Committee on Taxation estimates that winding down the program more quickly and increasing penalties for those companies promoting improper claims would generate about $79 billion over 10 years….
But [Congressional action against the fraud] is not assured because many key senators have concerns about aspects of the bill. Wyden said a strong vote in the House could spur the Senate into quicker action. Still, passing major legislation in an election year is generally a heavy lift….
Larry Gray, a certified public accountant from Rolla, Missouri, said he had concerns early on about how the program could be abused.
“There was no documentation really to speak” and the IRS just sent out the checks, Gray said. ”They just started printing the checks and I believe Congress was wanting them to print the checks.”…. He has lost clients who didn’t want to hear that they did not qualify when others were telling them they did…
Some fraud has been prolific. For instance, a New Jersey tax preparer was arrested in July on charges related to fraudulently seeking over $124 million from the IRS when he filed more than 1,000 tax returns claiming the employment tax credits.
In an update issued Thursday about the program, the IRS said that it has thousands of audit in the pipeline and that as of Dec. 31, it has initiated 352 criminal investigations involving more than $2.9 billion in potentially fraudulent claims.
These investigations are a drop in the bucket that will never punish more than a couple percent of the fraudsters. The government has largely given up on trying to recover the several hundred billion dollars in fraudulent pandemic relief payments it made in 2021 and 2020, and a federal agency isn’t even trying to recover amounts of less than $100,000, reports Reason Magazine last November.
Over $320 billion was stolen from just two of the federal government’s pandemic relief programs.
But only a tiny number of people have been prosecuted for the fraud — less than “1,400 individuals…have been found guilty of fraud connected to COVID-19 relief efforts, out of millions of people who likely committed fraud. There have only been 1,051 sentences handed down in those cases, often requiring restitution of fraudulent payments, and leading to jail time in hundreds of cases, including 33 who received sentences of 10 years or more:
But recovering all the lost funds is impossible. In some cases, officials aren’t even trying: The SBA decided earlier this year not to pursue collections actions against individuals who haven’t repaid EIDL loans of $100,000 or less. The SBA says trying to collect those loans would be more costly than whatever might be recouped—and since many of the loans were probably given out fraudulently, tracking down who got what will be extra difficult.
Even when fraudsters can be identified, they usually repay only about an eighth of what they owe: “the GAO reported in May that states had identified about $55.8 billion in fraudulent and nonfraudulent unemployment overpayments that occurred between March 2020 and March 2023. Of that, about $6.8 billion had been recovered.”
Foreign criminals received countless billions of dollars from America’s pandemic unemployment funds. Such handouts were paid for with government borrowing that has increased America’s national debt to a point where it is now much bigger than our economy.
The New York Post believes that half of America’s pandemic unemployment money may have been stolen, with foreign scammers collecting most of the stolen money.
At the state level, California had the largest dollar amount of fraudulent pandemic unemployment payments. Biden rewarded this incompetence by appointing as his Secretary of Labor Julie Su, the secretary for the California Labor and Workforce Development Agency, which made the fraudulent payments. She was barely confirmed by the U.S. Senate, on a party-line vote by the Senate. As Tom Manzo noted in The Hill,
Countless Californians, ranging from business owners to those struggling on unemployment, have suffered because of Su’s incompetence. While Su was at the helm…the “most significant fraud on taxpayer funds in California history” took place at the Employment Development Department (EDD). Here’s how it went down. Prior to the pandemic, the EDD failed to update its outdated system, even though California had set aside $30 million for a modernization effort more than four years earlier. Under Su’s leadership, this crucial update never made it out of the “planning stages.”
When the pandemic hit, millions of Californians tried to apply for desperately needed unemployment insurance benefits. In response, the EDD’s system crumbled, and Californians seeking help were abandoned. Fewer than one percent of calls were answered by the agency helpline. As many as 1.8 million Californians suffered without their payments. The outrage was so great that state leaders demanded an auditor look into the problems plaguing the EDD. While investigating the website debacle, the audit also uncovered massive fraud that was taking place during the same time period.
Not all criminals got COVID relief payments due to fraud or scams. Some legally qualified for pandemic relief payments, because the coronavirus relief legislation was deliberately written by Democrats to include prisoners in the U.S., including those who already had money.
Prison inmates got $1,400 stimulus payments under the COVID relief law that President Biden signed in March 2021. Sen. Bill Cassidy (R-LA) objected to that, saying prisoners have “their living and medical expenses paid for by the taxpayer,” “don’t pay taxes,” and “can’t be unemployed. Inmates are not economically impacted by COVID.” Senator Tom Cotton noted that “Dylann Roof murdered nine people,” yet “he’ll be getting a $1,400 stimulus check as part of the Democrats’ ‘COVID relief’ bill.”
