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WASHINGTON — Sen. Mitt Romney and his colleagues are attempting to curb widespread fraud by ending a COVID-19-era tax credit.
The Employee Retention Tax Credit — created under the Coronavirus Aid, Relief, and Economic Security Act of 2020, and later expanded in 2020 and 2021 — is a refundable credit available to businesses that paid wages during the height of the pandemic in 2020.
The U.S. Department of Treasury's Financial Crimes Enforcement Network in a November 2023 report said more than $2.8 billion of potentially fraudulent claims of the tax credit have been under investigation.
Since this tax credit has a track record of attracting fraud, Romney said he thinks lawmakers will welcome the Employee Retention Tax Credit Repeal Act with open arms. The proposed bill will prevent the IRS from processing those tax credit claims filed after Jan. 31, 2024, and expand penalties on fraud.
"In a rare moment of widespread agreement in Washington, almost all members of Congress agree that we should eliminate that tax credit — which has been pervaded by fraud and cost nearly 200% more than originally projected," said Romney.
"Stealing from the government is stealing from hardworking taxpayers. Instead of repurposing the tax credit funds for future spending programs, we should eliminate this plagued credit now to lower our national debt."
What has the IRS said about the tax credit and fraud?
In March this year, the IRS issued a warning to businesses to keep clear of "unscrupulous and aggressive promoters" who want to file questionable claims.
"We remain concerned that unscrupulous promoters and numerous myths about eligibility for this credit could put well-meaning businesses at risk," said IRS Commissioner Danny Werfel. He warned employers should review the eligibility requirements before filing a claim for the tax credit.
"Relying on a marketer who is looking to take a hefty percentage fee of the potential claim adds risk for well-meaning businesses given the ongoing IRS compliance work," Werfel added. During a private meeting with the Senate Finance Committee, Werfel admitted roughly 95% of the tax credit claims for this tax break were fraudulent, the Associated Press reported.
'A critical step'
Sens. Thom Tillis, R-N.C., and Joe Manchin, I-W.Va., are co-sponsors of the bill. Tillis called the bill "a critical step toward addressing America's debt crisis."
"It's past time to eliminate this fraud-ridden pandemic-era policy so we can concentrate on getting our fiscal house in order," he said.
Manchin remarked on the need for practical and timely solutions and highlighted a clear step forward for the IRS.
"Congress established the ERTC during the onset of the COVID-19 pandemic to encourage businesses to retain employees during such unprecedented circumstances," he said. "As President Biden formally ended the COVID-19 Public Health Emergency in May 2023, it's time for the IRS to move on, too."
