For businesses in Virginia that have claimed the Employee Retention Credit (ERC), the risk of facing fraud allegations from the Internal Revenue Service (IRS) is a very real concern. Businesses have filed billions of dollars in fraudulent claims—some intentionally, and some not—and the IRS is now in the process of seeking to recoup as many taxpayer dollars as possible.

More than two years after approving the IRS' “John Doe” summons targeting Kraken customers’ personal information and transaction data, a federal court has compelled Kraken to comply. While Kraken has disputed the IRS' authority to issue the summons, the court that initially authorized the summons in May of 2021 has now stated that Kraken must supply the requested information in order to avoid being held in contempt of court.

The Internal Revenue Service (IRS) is targeting businesses (and business owners) that fraudulently claimed the Employee Retention Credit (ERC). However, the IRS also acknowledges that many business owners unknowingly submitted invalid claims due to falling for fraudulent ERC filing promotion scams. As a result, it is now offering the opportunity for eligible businesses to withdraw their ERC claims before they trigger audits and investigations. Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what business owners need to know:

The Employee Retention Credit (ERC) was an economic relief program made available to businesses impacted by the COVID-19 pandemic, and until recently, affected businesses could claim the credit retroactively. However, the Internal Revenue Service (IRS) has now placed a moratorium on new ERC claims as it investigates widespread fraud under the program. Virginia federal tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.

Among several other enforcement priorities, the Internal Revenue Service (IRS) and U.S. Department of Justice (DOJ) have been targeting “abusive trust tax evasion schemes” in 2023. Their focus on these schemes will likely continue into 2024 as well, and as a result, taxpayers and promoters of these schemes must be prepared to defend themselves if necessary.