We’d love to believe that the government operates with the highest standards in terms of efficiency and intentions. While that might be the case for intentions – though it’s still definitely debatable – if you think that about efficiency then we’ve got some land hovering above the Pacific Ocean that we’d love to sell you.
This is seen very plainly in the unfolding Employee Retention tax credit (ERC) and the massive cluster that resulted. This is a fun one, so let’s dig in and see what happened.
Here are Five Fast Facts about the ERC payback debacle:
- 😱 So It Began - In 2020, Congress was in full-blown panic mode to prevent an economic catastrophe from COVID shutdowns. One bill that was passed set up the Employee Retention Credit (ERC), which put money into businesses who didn’t let their workers go. It was intended to be a temporary measure with a $55 billion price tag, but it’s now cost American taxpayers over four times that much because of the way they set it up.
- 💸 Loosey Goosey - The biggest problem is that the language of the bill was so loose that it allowed a flood of claims, and the IRS prioritized shoveling money out the door rather than vetting all claims thoroughly. Even if they had, employers didn’t have to provide details or justify the amounts they claimed. Aren’t these lawmakers supposed to be smart enough to avoid stupid mistakes like this?!
- 🛏️ Bed Made - By using the tax system to deliver money from the program, they also opened the door to allowing for three years of claims (the default timeframe for revising tax returns). That’s right, businesses can still apply for ERC money years after the pandemic is done and COVID relief programs are over. Way to go, geniuses.
- 😣 Compounding Mistakes - Anytime there’s money to be made, people will rush in and make it, and this is no different. A whole new industry popped up where businesses could pay companies to get ERC money for them for a fee of up to 20% of the amount of ERC money obtained…even if it’s not legitimate. Couldn’t see that one coming, could we? Nah, course not.
- 🤦♂️ Rearranging The Deck Chairs - Now that they’ve realized the colossal mess they’ve made, the IRS is trying desperately to fix it. They’ve made a new offer to businesses that took ERC money under potentially…ah, let’s say sketchy circumstances. They only need to pay back 80% of it if they provide details about the firms that got them the ERC money. I suppose chasing down corrupt fraudsters after the fact is better than nothing.
🔥Bottom line: We really should take away a couple things from this. First, the government cannot do anything efficiently, and in a high intensity situation it does even worse. Ultimately, they’ve wasted hundreds of billions of taxpayer dollars, and will likely waste billions more “fixing” the problems they created. When is the next election…?
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