PPP and ERC Fraud: Are You At Risk of Facing IRS or DOJ Scrutiny in 2026?

While most of the world has moved on from the COVID-19 pandemic, the Internal Revenue Service (IRS) and U.S. Department of Justice (DOJ) are continuing to aggressively target pandemic-era fraud in 2026. This includes fraud under the Paycheck Protection Program (PPP) and Employee Retention Credit (ERC) program. Do you need to be worried? If so, what should you do? Here are some key insights from New York tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.

The IRS and DOJ Are Targeting All Forms of PPP and ERC Fraud

The IRS and DOJ are targeting all forms of PPP and ERC fraud in 2026. This includes fraud during the PPP loan application process, fraud perpetrated by PPP loan recipients, and all forms of fraud related to ERC claims. With this in mind, the following are just some of the most common examples of allegations in these cases:

• Making false statements to the federal government or federally-insured lenders
• Using falsified documents to support fraudulent PPP applications or ERC claims
• Applying for PPP loans or claiming ERC credits on behalf of non-existent businesses
• Fraudulently certifying eligibility for PPP loan forgiveness
• Promoting fraudulent PPP or ERC schemes or assisting with the submission of fraudulent claims

These allegations, among others, are among the IRS’ and DOJ’s top enforcement priorities in 2026. Reports indicate that fraud under the PPP and ERC cost U.S. taxpayers hundreds of billions of dollars, and the IRS and DOJ are working to claw back as much of this money as possible.

PPP and ERC Fraud Allegations Can Lead to Civil or Criminal Enforcement

Depending on the specific allegations, PPP and ERC fraud cases can be either civil or criminal. In civil cases, targeted businesses and individuals may face civil monetary penalties (CMPs) and liability for any applicable back taxes and interest. In criminal cases, businesses and individuals can face substantial fines, and individuals can also face federal prison time.

If It’s Not Too Late, Avoiding an Audit or Investigation is the Best Approach

For businesses and individuals already facing PPP- or ERC-related scrutiny, it is critical to engage experienced defense counsel promptly. For those who are not yet facing an audit or investigation, a proactive approach will be best. Depending on the circumstances at hand, coming forward through IRS CI’s Voluntary Disclosure Practice may be an option, or it may be possible to negotiate a resolution that avoids civil or criminal charges.

Schedule a Call with New York Tax Lawyer Kevin E. Thorn

Do you need to know more about avoiding penalties for PPP or ERC fraud in 2026? If so, we can help, and we encourage you to contact us promptly for a confidential initial consultation. To schedule a call with New York tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, give us a call at 914-534-6004 or tell us how we can reach you online today.