The IRS estimates that fraud was behind 70-90% of the roughly $300 billion it paid out during the pandemic to employers under the Employee Retention Credit, reports Reason Magazine. That’s well over $200 billion in fraud for just one federal pandemic relief program. The “vast majority” of these payments were scams, the IRS believes. Behind closed doors, the head of the IRS suggested the rate of fraudulent payments was even bigger, around 95%. Reason explains:
The Employee Retention Credit was offered to businesses that were shut down by government COVID-19 orders in 2020 or the first three quarters of 2021, experienced a required decline in gross receipts during that period, or qualified as a recovery startup business at the end of 2021. But it was clear early on that scammers were taking advantage of giveaways of taxpayer money, either to claim it for themselves or to pose as middlemen helping unwitting business owners file claims.
In March of 2023, the tax agency warned of “blatant attempts by promoters to con ineligible people to claim the credit.” In September of that year, it stopped processing claims amidst growing evidence that vast numbers of applications were “improper,” as the IRS delicately puts it. In March 2024, the agency announced that its Voluntary Disclosure Program had recovered $1 billion (since raised to over $2 billion) in improper payouts from participants who got to keep 20 percent of the take….As of the end of May, the IRS “has initiated 450 criminal cases, with potentially fraudulent claims worth nearly $7 billion.”
This official 70-90% estimate is a conservative, lowball estimate. When confronted by Senators over a whistleblower’s statement that 95% of claims for the employee retention credit were fraudulent, the IRS commissioner confirmed that that was likely the case. “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.'”
Of course, this is only the tip of the iceberg when it comes to pandemic stimulus fraud.
The amount of fraudulently paid claims that the government has recovered is a fraction of one percent of the fraudulent payments, only a drop in the bucket:
In April, Attorney General Merrick Garland boasted that the COVID-19 Fraud Enforcement Task Force (yes, it’s widespread enough to rate its own task force) had “charged more than 3,500 defendants, seized or forfeited over $1.4 billion in stolen COVID-19 relief funds, and filed more than 400 civil lawsuits resulting in court judgements and settlements.”
But the various pandemic stimulus bills tallied up to trillions of dollars….
“The total amount of fraud across all UI [unemployment insurance] programs….during the COVID-19 pandemic was likely between $100 billion and $135 billion…” the Government Accountability Office warned last September. Earlier, the Small Business Administration’s Inspector General found more than $200 billion stolen from the Economic Injury Disaster Loan (EIDL) program and Paycheck Protection Program (PPP). “This means at least 17 percent of all COVID-19 EIDL and PPP funds were disbursed to potentially fraudulent actors,” noted the report.
Reason Magazine says that these earlier estimates of fraudulent claims were unduly low, and other “agencies need to return to their own investigations with a somewhat more skeptical eye” in light of the IRS’s more grim assessment based on fuller information.
Foreign criminals received countless billions of dollars from America’s pandemic unemployment funds. Even before the latest revelations from the IRS, The New York Post concluded that more than half of America’s pandemic unemployment money may have been stolen, with foreign scammers collecting much 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.
Biden should have let these pandemic relief programs expire, but instead, he continued them, even after it became obvious that they were pervaded by fraud. He also pushed through $1.9 trillion in wasteful government stimulus spending. These big-spending policies caused inflation, according to even Democratic economists like Harvard’s Larry Summers — who was Treasury Secretary under President Clinton — and Obama economic advisor Steven Rattner. As Rattner noted in the New York Times, Biden spent “an unprecedented amount” of taxpayer money, which resulted in “too much money chasing too few goods.”
