James Cross
If there is an organization whose bad side you don’t want to be on, it’s the Internal Revenue Service. The new funding authorized by President Biden in the most recent infrastructure bill has allowed for the IRS to ramp up their investigations and audits of individuals and companies who have engaged in tax fraud.
A New Fraud Task Force
Recently, the IRS has dedicated a massive task force of 30,000 agents to an investigation into millions of small businesses. These businesses are being targeted for their potential mishandling of COVID relief funds, specifically the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).
PPP funds were meant to help businesses hold onto employees during the economic uncertainty that came with the COVID-19 pandemic. Millions of businesses qualified for these interest-free loans, and it wasn’t long before stories started to surface of businesses who had taken the funds, but not used them to pay their employees on payroll.
The Years Since COVID
More and more of these stories have surfaced in the years since things started to settle after the pandemic. With the stories came a great deal of outrage from citizens and politicians alike, who put pressure on the government and the President to investigate the source of the potential fraud.
Unfortunately, with an underfunded IRS there was little that the government could do to push for the investigation. After new funds and new hirings were authorized to the IRS, though, a new plan was announced to look into the potential fraud regarding these payment programs.
Financial Experts Weigh In
Financial expert John Williams wrote a report that shed light on the magnitude of this operation, and its potentially far-reaching consequences. According to Williams, a staggering $1.2 trillion in relief funds was dispersed by the Small Business Administration over the past two years.
Information that has surfaced recently, though, suggest that a significant portion of the funds didn’t make it to the intended recipients of the loans. A staggering 70% of the funds that were dispersed by the SBA never made it to employees, and were instead diverted into the hands of business owners and shareholders.
Questioning the Integrity of Relief Programs
These revelations have raised serious questions about the integrity of the relief programs, particularly in light of the fact that many of these funds have, in the years since they were dispersed, been forgiven by the United States government.
Several high-profile cases have captured public attention regarding misuse of COVID relief funds. One such figure is Marjorie Taylor Greene, who has been called out for taking out PPP loans and then subsequently having them forgiven, all while standing in staunch opposition to relief programs for student loans.
Mounting Pressure on the IRS
In light of mounting pressure to recoup lost funds and stem fraud, the IRS has engaged in a sweeping campaign to hold perpetrators of this fraud accountable. With a focus on identifying fraudulent activity and recovering the funds, the IRS is, in part, seeking to restore trust in the government relief efforts.
The size of the task force signals an escalation of the IRS’s efforts in enforcement. This is alongside the increase in large business and high-income tax audits that have recouped millions of funds in recovered tax revenue.
Potential Consequences for Small Business Owners
While the potential revenue is a good look for the IRS, the potential repercussions of the crackdown could also reach far and wide. It could reverberate beyond the world of small business, potentially impacting consumer confidence and market stability.
As the investigation continues, many small business owners are grappling with the fear of being faced with audits and potential legal consequences regarding their participation in the PPP program. Even business owners that used funds appropriately could face consequences as a result of this investigation, potentially damaging confidence in the IRS.
Reshaping Public Perception
Ultimately, the outcome of the IRS’s crackdown will shape public perceptions of financial integrity and government relief efforts. The unprecedented crackdown represents a pivotal moment in the nation’s economic landscape, as well as a changing tide regarding governmental accountability.
The actions are positioned to reshape the business landscape of America, as well as adjust expectations of accountability in a post-COVID era. Many individuals who believed that the PPP funds were fully unregulated and able to be fraudulently claimed freely are now potentially facing significant consequences.
Concerns From The Public
Many people, in response to the announcement of the investigation, have expressed some concerns regarding the IRS ramping up enforcement. Some wondered what the IRS was going to do with the funds once they were recovered, with a small subset accusing the IRS and government of dispersing the recovered funds amongst themselves.
More people discussed how the disbursement of PPP funds potentially contributed to the rise in real estate values, due to a flood of investment money in the market. One person even pointed out how many of the fraudulent business owners were not subtle in their misuse of funds, suddenly driving expensive cars and clothes at the height of the pandemic.
An Ongoing Investigation
The investigation into fraudulent use of PPP funds by small businesses will likely stretch on for years. The extent of the fraud is still being uncovered by the IRS, and the government has made clear that recovering fraudulently spent funds is a priority.
The importance of properly using government funds cannot be overstated, in a time where the government deficit is rapidly rising and conversations about governmental funds are regular segments on the news. Figuring out ways to bring in more revenue and tamp down on fraud is going to be critical going forward, and this new investigation by the IRS is the first step towards that goal.
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