Facing a PPP or ERC Fraud Investigation in 2026? Here’s What You Need to Know

With hundreds of billions of taxpayer dollars lost to fraud during the COVID-19 pandemic, exposing pandemic-era fraud remains a top priority for the Internal Revenue Service (IRS) and U.S. Department of Justice (DOJ). Audits and investigations targeting fraud under the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) programs can pose substantial risks, and targeted businesses and individuals must be prepared to protect themselves by all available means. Learn more from experienced Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

PPP and ERC Fraud Allegations Can Take Many Different Forms

The IRS and DOJ are targeting all forms of fraud under the PPP and ERC programs. For PPP loans, this includes fraud during and after the loan application process. Common allegations of PPP fraud include:

• Submitting fraudulent PPP loan applications
• Submitting fraudulent supporting documentation
• Using PPP funds for ineligible expenditures
• Fraudulently certifying eligibility for loan forgiveness

In ERC fraud cases, the IRS and DOJ are targeting businesses that improperly claimed credits or refunds at any time while the ERC was available. This includes pursuing audits and investigations seeking to uncover violations such as:

• Claiming the ERC for ineligible (or non-existent) businesses
• Claiming the ERC for ineligible (or non-existent) employees
• Improperly calculating a business’s qualifying wages
• Submitting fraudulent supporting documentation

These allegations—among many others—have been at the center of PPP and ERC fraud audits and investigations since the pandemic. In 2026, the IRS and DOJ are well-versed in what it takes to prove these allegations, making it imperative for targeted businesses and individuals to engage experienced defense counsel as soon as possible.

PPP and ERC Fraud Investigations Can Lead to Serious Federal Charges

While the IRS and DOJ are pursuing civil enforcement in many cases, PPP and ERC fraud allegations can also lead to serious criminal charges. IRS Criminal Investigation (IRS CI) works alongside the DOJ to build criminal cases when warranted, and we have seen PPP and ERC-related prosecutions involving charges for bank fraud, tax fraud, wire fraud, conspiracy, and a variety of other federal offenses. These offenses carry substantial fines for businesses and individuals, and individuals may also face federal prison time.

A Proactive Defense is Critical for Avoiding Unnecessary Consequences

For businesses and individuals facing PPP- or ERC-related scrutiny in 2026, building and executing a proactive defense is critical to avoiding unnecessary consequences. While it may be possible to resolve a PPP- or ERC-related audit or investigation without formal charges being filed, doing so will require a cohesive defense strategy tailored to the specific facts, circumstances, and allegations at hand.

Request an Initial Consultation with Virginia Tax Lawyer Kevin E. Thorn

If you need more information about defending against a PPP or ERC fraud audit or investigation in 2026, we encourage you to contact us promptly. To request an initial consultation with Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 703-752-3752 or contact us confidentially online now.