IRS Actively Seeking Out CARES Act Fraudsters

Officials say criminals have already gotten millions in PPP loans and unemployment insurance.

The Internal Revenue Service (IRS) is actively seeking out people who are trying to illegally obtain funds from the Coronavirus Aid, Relief and Economic Security (CARES) Act, IRS officials said Tuesday during a webinar sponsored by the CPA Academy, titled, “CARES Act Enforcement: What Can We Expect from the IRS?”

As Michael Batdorf, executive director of refund and cybercrimes at the IRS, said, “Even if only 1% of the applications are fraudulent, that is 1% of $600 billion, which is $6 billion. There are always criminals looking to exploit any difficult situation. We want to warn taxpayers about the potential fraud.”

Some criminals are using fake URLs that appear to be from the IRS and phishing attempts to get money from taxpayers, Batdorf said. The IRS also noticed early fraudulent attempts to get Paycheck Protection Program (PPP) loans, he said.

“One of the earliest was out of Rhode Island,” Batdorf said. “There was no company. It was a completely false application for a $500,000 loan. Then there was one out of Norfolk, Virginia. It was a completely false loan application, but they managed to receive $150,000. There have been millions of dollars lost around the country.”

Then there are those fraudsters who steal people’s identification to file false unemployment claims, he added. “They are clogging the system with stolen IDs,” he said. “It is affecting almost every state.”

Nikki Johnson, director, collection policy, said the IRS is “balancing the need to dispense funds to those who are eligible with finding those who are fraudulent. We will whittle out those who are not legitimate. We are carefully reviewing every Form 7200, advanced payment of employer credits due to COVID-19, to ensure there is no ID fraud.”

John Hinding, director, cross border activities at the IRS, added, “We are going through the Form 7200s. We may come across a brand new company with no employees. It is pretty easy to see that it is a fraudulent application. We have a decent amount of those. Some are honest mistakes.”

Johnson said the IRS has been careful to assign “highly skilled employees to review these forms because it is a new process. They are skilled at investigating compliance cases and determining when something appears to be suspicious.”