In early February, federal prosecutors in Utah accused Zachary Bassett and Mason Warr of cheating the United States government out of millions of dollars. The accounting firm they operated had submitted more than 1,000 fraudulent tax forms to the Internal Revenue Service on behalf of businesses trying to claim pandemic-era stimulus funds, the prosecutors said, according to the New York Times. COS Accounting and Tax shut down later that month, leaving businesses and taxpayers that had paid the firm to help them claim federal money trying to figure out what had happened and why they were suddenly receiving audit notices from the I.R.S. Amid the onset of the pandemic in 2020, as large swaths of the economy went into lockdown, Washington set up various programs to help keep businesses and their workers afloat. Among them was the Employee Retention Credit, a tax benefit that was created as part of the initial $2 trillion pandemic relief legislation. The program offered businesses thousands of dollars per employee if they could show that COVID-19 was hurting their bottom lines and that they were continuing to pay workers. The money was intended to be a lifeline for struggling companies. Instead, it has become a magnet for fraud, creating a cottage industry of firms that market themselves as tax credit specialists who can help clients — even those who don’t actually qualify for the money — reap huge refunds from the I.R.S. Although the public health emergency is over, taxpayers can continue to apply for the tax credit until 2025. That has fueled a run for the money and the proliferation of financial service providers, who often charge hefty upfront fees or take cuts of around 25 percent of any tax refund.
