What New Jersey Business Owners Need to Know About Facing PPP or ERC Fraud Allegations in 2026

Could you be at risk of facing Paycheck Protection Program (PPP) or Employee Retention Credit (ERC) fraud allegations in 2026? While it has been several years since these pandemic-era programs closed, the Internal Revenue Service (IRS) and the U.S. Department of Justice (DOJ) continue to aggressively target business owners and other individuals suspected of PPP and ERC fraud. As explained by New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, facing PPP or ERC fraud allegations can pose serious risks—including the risk of criminal prosecution in some cases:

The IRS and DOJ Are Pursuing Both Civil and Criminal Penalties in Cases Involving PPP and ERC Fraud

The IRS and DOJ are pursuing civil and criminal enforcement actions alleging fraud under the PPP and ERC. This includes allegations against businesses, business owners, accountants, and other “promoters,” and other individuals. In PPP fraud cases, common allegations include:

• Seeking PPP loans for ineligible businesses
• Submitting false records in support of fraudulent PPP loan applications
• Using PPP loan funds for non-qualifying expenses (including personal expenses)
• Fraudulently certifying eligibility for PPP loan forgiveness
• Making false statements to banks and the U.S. Small Business Administration (SBA)

In ERC fraud cases, common allegations include:

• Claiming ERC tax credits for ineligible businesses or employees
• Claiming ERC tax credits for non-existent businesses or employees
• Claiming ERC tax credits for non-qualifying wages
• Using false payroll records and other fraudulent documentation to support ERC claims
• Submitting false returns or making false statements to the IRS

These allegations, among others, can expose businesses and individuals to substantial fines. They can also expose individuals to federal prison time in some cases. To avoid these risks, businesses and individuals not yet facing federal scrutiny should work with experienced tax counsel to pursue a proactive resolution before an audit or investigation begins.

Proactively Resolving PPP and ERC-Related Exposure in 2026

What is involved in proactively resolving a business’s or individual’s PPP or ERC-related exposure in 2026? The answer to this question can vary. While the IRS previously offered program-specific options for coming into voluntary compliance, these options are no longer available.

For those at risk of criminal charges, seeking a proactive resolution may involve coming forward under the IRS CI’s Voluntary Disclosure Practice. This is specifically an option for resolving willful violations of federal law. For those who need to resolve non-willful violations, deciding how to proactively engage with the IRS will require a careful assessment of the specific facts and circumstances at hand.

Learn More from New Jersey Tax Lawyer Kevin E. Thorn

New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, has extensive experience representing clients in high-stakes IRS and DOJ enforcement matters. This includes matters involving allegations of PPP and ERC fraud. To discuss your situation with Mr. Thorn in strict confidence, call 201-842-7696 or request a confidential consultation online today.