Cracking Down on Fraudulent and Overstated Claims
- IRS rejects over 20,000 refund claims for Covid tax credit
- Claims were from employers that didn’t exist or have workers during the pandemic
- IRS cracking down on fraudulent or overstated claims
- Employee Retention Credit has cost the government at least $230 billion
- Cottage industry of firms emerged to help employers claim the credit
The Internal Revenue Service (IRS) is taking action against more than 20,000 refund claims for pandemic-era tax credits. These claims were submitted by employers that either didn’t exist or didn’t have employees during the required period. The IRS is specifically targeting claims for the Employee Retention Credit (ERC), a tax incentive created in 2020 to encourage businesses and nonprofits to retain their workers during the pandemic. The credit has already cost the government at least $230 billion, which is triple the initial estimates. In response to the popularity of the credit, a cottage industry of firms has emerged to assist employers in claiming the credit, often charging high fees. The IRS’s crackdown aims to address fraudulent and overstated claims, ensuring that the credit is being used appropriately.
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Factuality Level: 7
Justification: The article provides specific information about the IRS rejecting over 20,000 requests for tax refunds due to fraudulent or overstated claims for the Employee Retention Credit. It also mentions the purpose and cost of the credit, as well as the emergence of firms offering assistance for claiming the credit. However, the article lacks specific examples or evidence to support the claims made, and it does not provide a balanced perspective on the effectiveness or impact of the credit.
Noise Level: 7
Justification: The article provides some relevant information about the IRS rejecting requests for pandemic-era tax refunds and the problems with the Employee Retention Credit. However, it lacks in-depth analysis, evidence, and actionable insights. It also does not explore the consequences of these issues on those who bear the risks or hold powerful people accountable. The article stays on topic and does not dive into unrelated territories, but it could have provided more rigorous reporting and intellectual honesty.
Financial Relevance: Yes
Financial Markets Impacted: The news article pertains to the Internal Revenue Service (IRS) and the Employee Retention Credit (ERC), which are financial topics. It mentions the cost of the credit to the government, which has exceeded early estimates.
Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: The article discusses the IRS rejecting requests for pandemic-era tax refunds related to the Employee Retention Credit. While it highlights problems with the program and the cost to the government, it does not describe an extreme event.
www.wsj.com 
