IRS plans to tax fraudsters on illegitimate COVID-19 relief income

The Internal Revenue Service plans on taxing individuals who defrauded the Paycheck Protection Program (PPP) to illegitimately receive COVID-19 relief funds.

"We want to make sure that those who are abusing such programs are held accountable, and we will be considering all available treatment and penalty streams to address the abuses," IRS Commissioner Chuck Retig said, according to the Washington Times.

The IRS often taxes criminals on ill-gotten gains as a way of inflicting penalties in additional to criminal charges.

PPP funds were supposed to go to small businesses to cover basic, pre-approved expenses during the COVID-19 pandemic lockdowns. Recipients could then seek loan forgiveness provided they spent the funds on a list of acceptable expenses, such as rent, payroll and utilities, the Times noted.

In particular, the IRS is eyeing PPP beneficiaries who received a loan based on false representations about their business activities and those who legitimately secured PPP funds but then secured loan forgiveness despite allocating the funds to unapproved uses.

The IRS's warning comes amid increased congressional demand for oversight. Illinois Democratic Sen. Dick Durbin on Tuesday said his own son was the victim of an identity theft scheme in which fraudsters used his name to secure a PPP loan.

Of the $835 billion in funds the PPP distributed, an estimated $100 billion went to illegitimate recipients.