Schweikert Introduces Bill Combating Employee Retention Tax Credit Fraud

Representative David Schweikert (R-AZ) has introduced bipartisan legislation to address fraud in the Employee Retention Tax Credit (ERTC) system. This system, created during the COVID-19 pandemic to aid small businesses, has been exploited. The proposed legislation prohibits processing tax credit claims made after January 31st, 2024, effectively repealing the system early.

In his press release, Rep. Schweikert described how the fraud was perpetrated, in which "promoters" offered businesses help to file the refundable ERTC claims.

"However, legitimate returns from small businesses desperately needing support were crowded out by perverse promoters looking to take advantage of an emergency program, landing ERTC on the IRS's "Dirty Dozen" list in 2023," as Rep. Schweikert described.

As a result, the bill would hasten the sunset date of the ERTC and prohibit processing claims made after January 31st, 2024. Additional provisions would increase the penalty for making these false claims and those who fail due diligence requirements, on top of extending the statute of limitations on assessments to six years.

The Arizona Congressman suggested that the ERTC, as it stands, would cost taxpayers $550 billion if allowed to continue. He estimated that bringing the sunset date forward would save taxpayers nearly $80 billion in the next ten years.

"We've all heard from the number of small businesses in our district waiting for their claims to be processed. A 1.4 million return backlog still exists, and moving the deadline up, rather than waiting until April 2025, will enable the IRS to go after the bad actors seeking to take advantage of taxpayers while approving legitimate claims faster and delivering long-overdue refunds to small businesses. Congress would be perpetuating a moral hazard if this level of fraud were allowed to go unpunished. It's past time fiscal responsibility prevails, and we act on behalf of future generations who will be shouldered with a more than $35 trillion national debt," said Schweikert.

Representative Jared Golden (D-ME), the bill's cosponsor, said, "This tax credit was an emergency response to protect workers and small businesses during the pandemic. Today, bad actors are abusing the program to pad their bottom lines at Americans' expense. It's past time we end this program — the conditions that made it necessary are over, and it's a ripe target for tax cheats. Taking it off the books will protect taxpayers from fraud."