Did you receive an SBA PPP loan?
We have up to the minute details about SBA’s criminal investigations of businesses who applied for the PPP loan.
A couple of months ago, we released a video confirming that SBA had started reviewing loan applications. We recently learned from a credible source working with SBA that SBA and FBI are working together and the criminal investigations have begun.
Here’s a summary of what we just learned:
1. The criminal investigations have already identified numerous businesses with suspicious activity.
2. SBA and FBI are reviewing ALL loans for fraud, regardless of the loan dollar amount, even if you didn’t request loan forgiveness.
3. If you receive a request from your bank for additional documents and information, you have just days to respond. If you fail to respond, your case will be sent to FBI for further criminal investigation before your case is referred to the US Attorney’s Office.
4. Criminal investigators have access to all the documents you submitted with your PPP application. These criminal investigators are combing through records to verify facts, such as:
a. Whether your company was actually operating in 2019 and in 2020, and how long your company has truly been in business. In other words, was your company simply dormant and truly not conducting business or attempting to generate revenue? If your company was operating, did you close your business prior to COVID-19? Remember, the purpose of the PPP loan was to help companies stay open for business and keep employees employed.
Several ways to verify this fact is whether your company kept its business license active.
For retail stores, did you file sales tax returns reporting gross revenue? Did you maintain your required insurance (general liability and workers’ compensation insurance)? What information did you report to your insurance company about the number of employees you had?
b. Investigators will also look at whether your company rehired employees (or kept workers employed) after receiving a PPP loan?
c. Did your company file quarterly payroll tax returns in 2019 and W2s for its employees in January of 2020? Also, did your company pay payroll taxes?
d. If you use a PEO, make sure you have proof that your PPP funds were used to pay for employee wages. Make sure you have an official payroll report from your PEO or payroll company.
e. Also, very important, if you own multiple companies, did you keep funds in the same company’s bank account that applied for the PPP loan, or did you transfer funds to other business entities?
It takes just minutes for a criminal investigator to verify most of your company’s financial information.
Investigators can quickly verify the total number of employees working for your business. This information is reported on line 1 of your Form 941 federal payroll tax return and with your workers’ compensation insurance carrier. FBI and IRS can even contact your bank to confirm total deposits and identify checks drawn on your business and personal bank accounts before and after you received PPP funds.
If the SBA investigators find fraud, they will then refer your case to FBI.
If you are contacted by FBI, as a criminal and civil tax attorney, I recommend you do not communicate with FBI until you retain a qualified tax attorney.
Your attorney will want to review your financial records (GL, P&L, balance sheet), payroll records, and overall business activity.
Also, remember that any communication you have with your CPA or accountant is not protected. Only information shared with your attorney is protected under the attorney-client privilege. Your CPA can be subpoenaed to appear before a grand jury or summoned to produce information and records used to construct your financials, tax returns, and PPP loan application.
If you don’t have a tax attorney, contact Milikowsky Tax Law. We have extensive experience with criminal tax matters as well as government financial compliance.