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$283 billion paid: A pandemic tax credit nobody measured for fraud
The IRS paid out $283 billion through the Employee Retention Credit and never produced the fraud estimate the law requires.
Internal Revenue Service
- Paid to employers, as of June 2025About $283B1
- Claims the IRS reviewed in 20241M+ claims, $86B+2
- Showing clear signs of being wrong10%–20%2
- Showing an unacceptable level of risk60%–70%2
- Criminal cases opened by May 31, 2024450 (≈$7B in claims)2
- Official improper-payment estimate████████████████
What happened
The Employee Retention Credit was a Covid tax break for businesses that kept workers on payroll. Promoters marketed it hard, and claims kept flooding in years after the pandemic ended.
When the IRS reviewed more than a million claims in 2024, it found 60 to 70 percent showed an unacceptable level of risk, and 10 to 20 percent showed clear signs of being wrong.
Why nobody caught it
- Claims came in on paper amended returns that had to be processed by hand, and key eligibility facts weren't required on the form.
- GAO found in February 2026 that the IRS never completed the improper-payment estimate the law requires for this credit.
How sure are we?
An auditor, inspector general or the agency itself estimated the fraud. It's a measured range, not a list of names.
The IRS's own review says most claims it examined were risky or wrong. No one has published a total for fraud, which is exactly the problem.
Sources
- GAO-26-107456: lessons from the Employee Retention CreditU.S. Government Accountability Office · Feb 10, 2026
- IR-2024-169: IRS review indicates vast majority of ERC claims show risk of being improperInternal Revenue Service · Jun 20, 2024
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