PPP, EIDL and ERC: Different Programs, Same Enforcement Reality

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The Minnesota lesson: relief programs don’t end; they evolve

In early January 2026, the SBA announced it had suspended 6,900 Minnesota borrowers tied to 7,900 PPP and COVID EIDL loans totaling roughly $400 million, restricting access to new SBA lending as part of a broader PPP investigation while suspected loan fraud is reviewed.

SBA Administrator Kelly Loeffler described Minnesota as “just the first state,” reinforcing that this is being framed as the start of a broader cleanup posture, not an isolated event.

For advisors, this is the clearest reminder of the modern enforcement cycle:

Speed (2020-2022) → Volume (2023) → Risk Scoring (2024-2025) → Centralized Enforcement (2026+)

That same arc is already visible in the ERC world.

How PPP, EIDL, and ERC Converge in the Scrutiny Era

PPP (Paycheck Protection Program)

• Bank-originated loans backed by SBA
  
• Forgiveness based on eligible uses and documentation (and the potential for a later PPP loan audit)
  
  

EIDL (Economic Injury Disaster Loan)

• Direct SBA disaster lending
  
• Eligibility/need tests and use-of-funds requirements
  
  

ERC (Employee Retention Credit)

• IRS-administered refundable payroll tax credit
  
• Eligibility and wage calculations are tied to payroll quarters and audit documentation standards
  
  

Different agencies, different mechanics, but the enforcement reality converges in audit IRS terms because all three:

• Rely on taxpayer-provided representations
  
• Touch payroll, revenue, eligibility narratives and supporting records
  
• Create massive datasets that can be screened years later

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Why ERC is at a similar inflection point

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The IRS has already signaled that ERC is past the “filing gold rush” and deep into enforcement and correction.

• The IRS implemented a moratorium on processing new ERC claims effective September 14, 2023, due to widespread concerns about questionable filings.
  
• The IRS also published a formal ERC claim withdrawal process for certain unpaid (or uncashed) claims, one of several “cleanup” pathways that only show up when an agency is preparing for volume enforcement.
  
• The IRS launched a Voluntary Disclosure Program (VDP) to unwind improper ERC claims under structured terms; another hallmark of a program moving from growth to enforcement.
  
• Legislative Extensions: With the passage of the One Big Beautiful Bill (OBBBA) in 2025, the statute of limitations for certain ERC quarters was extended to six years. This gives the IRS a significantly longer window to examine claims.
  
  

In other words, Minnesota isn’t “about PPP.” It’s about posture. And that posture is already here for ERC.

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What advisors should take from the PPP/EIDL enforcement playbook

Minnesota, effectively a live PPP loan investigation case study, illustrates three patterns advisors should expect to see repeated across other COVID-era programs:

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1) “Batch actions” are normal now

‍The SBA didn’t target one borrower; it flagged thousands at once.
That’s the model: centralized analytics → mass screening → escalations.

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2) Future access becomes leverage

‍The enforcement tool wasn’t only “investigate.” It was “restrict future eligibility while we investigate.”

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3) Intermediaries don’t escape scrutiny

‍When an agency believes a market got flooded with aggressive activity, they look at the ecosystem: preparers, promoters, brokers and patterns. (That’s been explicit in ERC enforcement messaging.)

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Payroll Companies Are in a Catch-22 (and That’s Why They Need a Defense Layer)

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Payroll providers are targets, even when they do everything “right.”

They’re often the operational backbone that processes payroll filings and supports ERC submissions. But that creates a catch-22:

• If enforcement intensifies, payroll providers don’t want to look like they did something wrong
  
• At the same time, if their clients face scrutiny, those clients will look back at the payroll provider for answers, documentation, and accountability
  
  

This is why payroll teams should treat ERC as a relationship and reputational risk, not just a tax topic.

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Why it matters to payroll leaders

• Client trust is on the line: even when ERC was handled by a third party, clients often assume, “My payroll company should’ve known.”
  
• Your support team becomes the front line: documentation requests, quarter-by-quarter payroll detail, and “what exactly happened here?” conversations land on payroll, often on an accelerated audit timeline.
  
• Silence is expensive: if you can’t point clients to a clear defense path, frustration can turn into churn.

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Positioning Harbor Shield ERC for payroll audiences (safe + strong)

Harbor Shield ERC is an additional layer clients can adopt so that if questions come later, they’re not forcing the payroll provider to be the defender. It helps payroll firms say:

“We can support you operationally, but you should also have a dedicated defense plan in place for ERC-specific scrutiny.”

Add a Defense Layer for Your ERC Filers

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Banks know the Difference Between “We Helped You” and “We Told You Not To” (Both Need a Protection Path)‍

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A lot of financial institutions supported ERC education and promotion. Many also refused to engage with certain ERC approaches entirely.

That creates two very real client segments for banks (and both are valuable):

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1) Clients the bank supported in good faith

‍These clients may now want an added layer of protection as scrutiny increases. The bank can proactively offer a prudent next step.

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2) Clients the bank warned, and who did it anyway

‍These clients are the ones most likely to come back under stress later. The bank needs a nonjudgmental way to say:

“Regardless of how you got there, here’s what you should do now to protect yourself.”

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What this unlocks for banks and advisors

• A client-care narrative: “We’re helping you prepare, not panic.”
  
• A de-risking narrative: “This reduces the chance you’re scrambling later.”
  
• A relationship-preservation move: “We’re staying helpful without owning the original filing.”
  
  

Suggested bank-safe positioning language

• “We’re not revisiting the filing decision—we’re strengthening your readiness today.”
  
• “Defense preparedness is a separate step from eligibility—and it’s increasingly important.”
  
• “We’re offering an additional layer of protection for clients who claimed ERC.”

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The advisor’s real problem: defense-cost risk (not just tax risk)

Most clients think ERC audit risk is binary: “Will they make me pay it back?”

But in practice, what hits first is often:

• response deadlines
  
• document production
  
• sustained technical and legal correspondence
  
• fees and distractions over months
  
  

That’s why the smartest advisory move is separating:

• Tax outcome risk (eligibility, amount, repayment exposure)
  from
  
• Defense-cost risk (what it costs to respond correctly and consistently)
  
  

What’s happening in Minnesota makes this easier to explain: even before guilt is proven, access can be restricted and cases can be reviewed at scale.

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Where Harbor Shield ERC fits: a risk-transfer tool for the “prove it” era

Harbor Shield ERC is positioned as the risk transfer layer for clients who have already claimed ERC and want to avoid the “scramble and pay whatever it takes” moment later.

The advisor framing is simple:

• ERC was the funding event.
  
• Harbor Shield ERC is the risk defense-readiness event.
  
  

Minnesota isn't a one-off; it's a preview. As the focus shifts to rooting out a few bad actors, the burden of proof falls on the group. The smartest move is to secure defense capacity now, while you still have the time to act deliberately.

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See How Harbor Shield ERC Works for Advisors

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Compliance notes: This article is for educational and operational overview purposes only and does not constitute tax or audit legal advice. You should consult qualified tax and legal professionals regarding your specific facts and circumstances.