83% of the $283 billion pandemic credit went out after the emergency
Summary
The Employee Retention Credit paid employers $283 billion to keep workers on payroll during COVID-19, according to GAO. But GAO's own data show 83 percent of that money -- about $235 billion -- was disbursed in 2022 through mid-2025, well after unemployment had returned to pre-pandemic levels. A separate TIGTA audit found IRS twice loosened its own screening criteria in 2022, letting 184,923 tax returns claiming $41.8 billion bypass pre-refund examination entirely -- and estimates more than $2 billion of that was paid in error. GAO's own recommendation to IRS: calculate how much of the $283 billion was improperly paid, as federal law requires. IRS refused, saying the estimate wouldn't be worth the cost.
A credit built for 2020, mostly paid in 2022 and after
The was created in the CARES Act to help employers keep paying workers through COVID-19 shutdowns and revenue collapses. Unemployment peaked at 13 percent in the second quarter of 2020; processed fewer than 80,000 claims across the rest of that year. By 2022, when unemployment had fallen back under 4 percent, claims surged: processed about $94 billion that year alone, the single highest annual total of the program. Another $89 billion went out in 2023, despite a processing moratorium the agency imposed that September. processed a combined $48 billion in 2020 and 2021 -- the actual crisis years -- against roughly $235 billion from 2022 onward. Refund timing lagged badly behind the claims: average processing time ran from 71 days for a return processed in 2022 up to 546 days for one processed in early 2025, according to National Taxpayer Advocate data cited by .
View data as table
| 2020-2021 (the crisis years) | 48 |
|---|---|
| 2022 | 94 |
| 2023 (moratorium began) | 89 |
| 2024-mid 2025 | 52 |
IRS loosened its own screening twice, and $41.8 billion slipped through
's parallel audit traced exactly how that money moved past scrutiny. Starting January 6, 2022, doubled the dollar threshold it used to refer employment-tax returns for possible examination before paying a claim -- a change found let 139,993 Tax Years 2020 and 2021 returns claiming $19.5 billion through unreviewed. From November 7, 2022, narrowed its review further, checking returns against only 2 of the 11 test scenarios it had developed to catch potentially erroneous claims -- letting another 44,930 returns claiming $22.3 billion bypass examination. told both changes were meant to handle the volume of incoming claims and speed up processing.
Combined, the two changes let 184,923 returns worth $41.8 billion go unexamined between January 2022 and June 2023. Using 's own examination rates, estimated more than $2 billion of that combined population was paid in error.
View data as table
| Threshold doubled, Jan. 2022 (139,993 returns) | 19.5 |
|---|---|
| Scenarios narrowed to 2 of 11, Nov. 2022 (44,930 returns) | 22.3 |
When IRS did check, its own targeting was still 15 percent wrong
's after-the-fact compliance efforts show how blunt the tools were even when deployed. Reviewing 22,072 Tax Year 2020 returns it flagged for potentially exceeding the maximum allowable , sent recapture letters proposing to claw back $572.9 million. Of those returns, 83 percent were fully disallowed on review -- but 15 percent turned out to be fully valid claims after all, undone by incomplete W-2 wage data itself had used to flag them. A separate batch of 500 randomly selected pre-refund examination letters, covering $80.8 million in claims, produced a similarly mixed picture: 29 percent of reviewed tax periods were fully disallowed, but 15 percent were fully allowed and 41 percent required to request more records just to decide.
Even 's withdrawal program -- letting employers who'd been misled by promoters pull back unpaid claims -- wasn't error-free: the agency's own quality review of 220 processed withdrawal requests found 28 percent contained employee errors, like incorrect dates or understated amounts.
View data as table
| Fully disallowed | 18,338 |
|---|---|
| Fully allowed (claim was valid) | 3,392 |
| Partially disallowed | 14 |
| Still under review | 328 |
For years, the only consequence for a bad claim was denial
Until July 2025, had no statutory authority to penalize an employer for filing an erroneous claim through the employment-tax system -- the 20-percent-of-excess-amount penalty that has applied to bad income-tax refund claims since 2007 simply didn't extend to credits like the . According to an official, promoters pushing questionable claims may have known this, and told employers filing erroneous claims had nothing to lose beyond the claim's denial. also never fully reconciled its own overlap checks between and the Paycheck Protection Program, which barred employers from double-claiming the same payroll costs under both programs.
By March 2025, had calculated that about 1 million employers participated in both programs, with 89 percent of them having at least one quarter of claims overlapping a PPP loan's covered period. A screening filter using PPP data flagged 96,653 employer identification numbers with potential overlap for tax years 2020 and 2021 -- and selected just 652 of them, about two-thirds of one percent, for actual examination. 's own Criminal Investigation unit, working the more serious end of the problem, opened 545 fraud investigations tied to over $5.6 billion in suspected fraud; only 75 produced federal charges, and 38 of those led to convictions.
GAO asked IRS to count the damage. IRS said no.
Federal law required to assess 's risk of improper payments within its first 12 months -- by around April 2021. didn't finish that assessment until February 2022, and even then confirmed to it never completed the legally required follow-up: no improper-payment rate estimate, no documented root-cause analysis, no corrective action plan. In August 2022, Treasury told the White House budget office directly that quantifying 's improper payments would provide "minimal value" and be "an ineffective use of resources." By 2023, itself was publicly citing tax professionals' own estimate that 95 percent or more of recent claims were likely ineligible -- while still declining to produce a program-wide number.
's recommendation was direct: develop and report an improper payment estimate for the whole $283 billion program. disagreed, arguing a retrospective estimate would be several years removed from the program, unlikely to be reliable, and would divert resources from higher-priority compliance work. Of 's four recommendations in this report, agreed to one, partially agreed to a second, and rejected the other two -- including the one asking it to simply measure what it spent.
The takeaway
- The money arrived after the crisis it was meant to solve. processed just $48 billion combined in 2020 and 2021, the years unemployment actually spiked. It processed $94 billion in 2022 alone, after the job market had already normalized -- and $235 billion total, 83 percent of the program, from 2022 onward.
- decided not to look at $41.8 billion in claims before paying them, and 's own math puts more than $2 billion of that as erroneous. Two separate 2022 decisions to loosen referral criteria -- meant to speed up processing -- let 184,923 tax returns bypass pre-refund examination entirely.
- was legally required to measure how much of the $283 billion was wasted. It refused. Its own 2022 risk assessment, filed 10 months late, flagged as susceptible to significant improper payments -- but never completed the follow-up estimate the law requires, and rejected 's recommendation to do so even after the program had wound down.
Program-scale, timing, and improper-payment-oversight figures are from -26-107456, 'COVID-19 Relief: Can Use Lessons Learned to Address and Prevent Improper Payments in Future Tax Programs' (February 10, 2026). Claims-examination and enforcement-outcome figures, including the 184,923-return, $41.8 billion unexamined-claims total and the associated $2 billion erroneous-payment estimate, are from a separate audit: Report No. 2024-400-068, 'Management Took Actions to Address Erroneous Employee Retention Credit Claims; However, Some Questionable Claims Still Need to Be Addressed' (September 30, 2024), which 's report does not cite. Both were read directly. The two reports examine distinct facets of the same program -- 's program-wide design and oversight review versus 's granular claims-examination audit -- and no figure in this piece is treated as confirmed by both unless sourced to both.
Sources(2) ▾
- U.S. Government Accountability Office, COVID-19 Relief: IRS Can Use Lessons Learned to Address and Prevent Improper Payments in Future Tax Programs (2026-02-10) — -26-107456, report to congressional committees. Direct gao.gov access returns HTTP 403 (Akamai block on automated requests); read via the Wayback Machine capture below, downloaded and read in full (78 pages). gao.gov · original document
- Treasury Inspector General for Tax Administration, Management Took Actions to Address Erroneous Employee Retention Credit Claims; However, Some Questionable Claims Still Need to Be Addressed (2024-09-30) — Report No. 2024-400-068. The tigta.gov direct report page and PDF path returned a 404 (moved/reorganized); the oversight.gov mirror of the same final audit report was directly reachable and used as the primary read (30 pages), with a Wayback Machine capture also confirmed as a fallback. oversight.gov · original document
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The Employee Retention Credit paid employers $283 billion to keep workers on payroll during COVID-19. According to , 83 percent of that money -- roughly $235 billion -- went out in 2022 through mid-2025, years after the unemployment spike the credit was built to address had already subsided. A separate audit by the Treasury Inspector General for Tax Administration found that twice loosened its own screening rules in 2022, letting 184,923 tax returns claiming $41.8 billion bypass examination before payment -- and estimates more than $2 billion of that was paid in error. Federal law required to estimate how much of the $283 billion was improperly paid. It hasn't, and when recommended it do so, refused.