IRS Targets Small Businesses for COVID Relief Fund Fraud, Aims to Recover Nearly $1 Trillion in Misused Funds

The Internal Revenue Service is cracking down on small businesses that may have improperly used federally-backed COVID relief funds.

IRS Launches Investigation Into CARES Act Fraud

Image Credit: Shutterstock / Mehaniq

In a strong show of action, the IRS has assigned 30,000 agents from their ranks to dig into millions of potential fraud cases related to CARES (Coronavirus Aid, Relief, and Economic Security) Act funds.

Small businesses across the country have been flagged.

Small Businesses to Be Scrutinized 

Image Credit: Shutterstock / Popova Valeriya

The businesses in question received pandemic relief funds in the form of loans that the government backed, intended to help keep businesses afloat during COVID-19 lockdowns. 

CARES Act Funds Meant for Specific Uses

Image Credit: Shutterstock / cabania

The loans were issued with no interest and were supposed to be used to make sure employees could still get paid even while the businesses were struggling with decreased revenue. 

Unauthorized Use of CARES Act Funds is Fraud

Image Credit: Shutterstock / Evgenia Parajanian

Rumors had been circulating for a while that many relief recipients had accepted the funds but used them for unauthorized purposes.

The IRS considered this fraud, and the businesses who engaged in this behavior face potentially severe consequences. 

New IRS Funding Provides Backing Needed for Investigation

Image Credit: Shutterstock / Andrey_Popov

Until recently, the IRS did not have the funding needed to investigate these rumors properly, so the issue was put on the back burner.

But recently, the IRS received $80 billion from the federal budget, so an investigation is now being launched.

Nearly a Trillion Dollars May Have Been Misused

Image Credit: Shutterstock / ElenaR

The government issued $1.2 trillion in small business relief to millions of small businesses, so an investigation of this scope is no easy task.

Emerging details reveal that 70% – or $840 billion – was not properly paid to employees as intended.

Owners and Investors Pocketed Loan Funds

Image Credit: Shutterstock / Yuliya Padina

Instead, the majority of the funds meant to supplement wages went into the pockets of owners and investors.

Widespread fraud is being revealed – fraud that ultimately cost American taxpayers money.

Many of the Loans in Question Have Been Forgiven

Image Credit: Shutterstock / Vitalii Vodolazskyi

Since a great deal of the loans that were given as part of COVID relief funding programs have been forgiven, critics are concerned that billions of taxpayer dollars were treated as free money for business owners while their employees went without pay.

Calls for IRS Action Come From Multiple Angles

Image Credit: Shutterstock / Casimiro PT

Taxpayers and members of Congress have all been leaning on the IRS to do something about the issue in an attempt to recover the money lost as well as provide consequences for the fraudulent activity.

Nerves Mount as Businesses Await Investigation

Image Credit: Shutterstock / PBXStudio

If found accountable, small business owners could be in big trouble. Impending audits have some nervous about what happens if the IRS takes legal action against them.

Some Owners May Have Assumed Use of Funds Would Be Overlooked

Image Credit: Shutterstock / zaozaa19

It seems that some percentage of business owners who received relief funds thought that the loans would not be scrutinized and, therefore, felt justified in using the funds however they saw fit. 

Public Watches to See How Investigation is Managed

Image Credit: Shutterstock / Salivanchuk Semen

Financial experts expect that how the IRS handles such a massive investigation will impact the overall public opinion of the agency and the federal government as a whole.

As businesses are held responsible for any fraud they may have committed, many questions still remain about what will happen with recovered funds.

Concern About Recovered Funds

Image Credit: Shutterstock / RomanR

Some wonder if the employees who originally should have received the funds should be compensated.

Others, whose distrust of the IRS has been well documented, worry that any recouped funds would not be regulated once received. 

Distrust in Government Drives Fears

Image Credit: Shutterstock / wellphoto

Other concerns have farther-reaching economic impacts, like whether the relief funds were used to line the pockets of investors who may have used that money to buy up real estate – inflating the market and putting homeownership out of reach for more Americans than ever. 

Investigation to Take Years

Image Credit: Shutterstock / nampix

Taxpayers can expect the investigation to take a significant amount of time. It will probably be years before any action is taken, as the IRS taskforce has to follow a specific set of rules. 

IRS Advises Care with Government Funds

Image Credit: Shutterstock / insta_photos

Until then, the IRS urges recipients of any government-backed funds to proceed with caution and familiarize themselves with any conditions of using the funds.

Government Determined to Recover Funds

Featured Image Credit: Shutterstock / Pormezz

The stakes are high for the investigation, and the federal government is motivated to hold anyone who committed fraud accountable.

There’s a high probability that consequences will be serious as the IRS sends a message about the severity of the situation.

IRS Cites Example of Convicted Fraudster

Image Credit: Shutterstock / fizkes

The IRS notes on its website that obtaining CARES Act funds under false pretenses or using the funds in unauthorized ways is illegal.

The website details an example of a Rhode Island man who was caught fraudulently obtaining funds from the Paycheck Protection Program.

Jail Time a Possibility for Perpetrators

Image Credit: Shutterstock / Phakorn Kasikij

After being caught, the man was prosecuted and now has to serve nearly five years in a federal prison. As more fraud is revealed in the investigation, it is highly likely that more people will face the same punishment.

Biden’s New 401(k) Rule: Employers Frustrated as Retirement Planning Responsibilities Shift

Image Credit: Shutterstock / lev radin

The latest Biden administration rule on 401(k) plans is reshaping how employers manage retirement plans. It’s a complex scenario requiring a fresh understanding of fiduciary duties and provider relationships. This rule aims to protect employees but also imposes new responsibilities on employers. Biden’s New 401(k) Rule: Employers Frustrated as Retirement Planning Responsibilities Shift

Elon Musk: New Immigration Bill ‘Enables Illegals to Vote’

Image Credit: Shutterstock / photosince

Elon Musk is calling for prosecutions after the text for a new senate bill on immigration was released. Musk accused the new bill of “enabling illegals to vote.” Elon Musk: New Immigration Bill ‘Enables Illegals to Vote’

Colorado Officials Reject Sanctuary City Status, Warn Against ‘Dangerous Game’

Image Credit: Shutterstock / Ruben2533

With increasing numbers of migrants arriving in Colorado, public officials have rejected any notion of the state becoming a sanctuary for migrants and asylum seekers. Colorado Officials Reject Sanctuary City Status, Warn Against ‘Dangerous Game’

Disney Challenges DeSantis’ “Don’t Say Gay” Rule With a Hefty Lawsuit

Image Credit: Shutterstock / Andrew Cline

Disney is set to appeal its refusal for a lawsuit against Ron DeSantis, who stripped the company of its rights for disagreeing with the Governor’s views on the teaching of sexual orientation in classrooms. Disney Challenges DeSantis’ “Don’t Say Gay” Rule With a Hefty Lawsuit

Trump on the Attack as 21 Million Americans Flock to Obamacare, Biden Pushes Forward

Image Credit: Shutterstock / Nicole Glass Photography

An unprecedented surge in health plan enrollments has reignited former President Donald Trump’s commitment to dismantling the program should he secure the GOP nomination once again. Trump on the Attack as 21 Million Americans Flock to Obamacare, Biden Pushes Forward

The post IRS Targets Small Businesses for COVID Relief Fund Fraud, Aims to Recover Nearly $1 Trillion in Misused Funds first appeared on From Frugal to Free.

Featured Image Credit: Shutterstock / Wileydoc.

The content of this article is for informational purposes only and does not constitute or replace professional financial advice.

(Visited 1 times, 1 visits today)