What Minnesota’s PPP/EIDL Crackdown Means for ERC Filers

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A Shift in Focus: From "Fast Money" to Verification

For years, pandemic relief programs moved quickly: PPP, EIDL, and ERC were designed to keep businesses alive, keep employees paid and inject capital into the economy quickly. Up until now, speed was more important than perfect audit documentation.

In early January 2026, the U.S. Small Business Administration (SBA) took a highly visible enforcement step in Minnesota as part of a broader PPP investigation posture: it suspended about 6,900 borrowers tied to roughly 7,900 PPP and COVID EIDL loans totaling around $400 million, blocking them from eligibility for new SBA loan programs while suspected PPP fraud is reviewed and cases are referred where appropriate, as reported by CBS News.

While these agencies aren't ignoring the genuine struggles businesses faced, it appears the Federal strategy has shifted toward a "cleanup" posture. Unfortunately, while the focus is on rooting out "bad actors," legitimate business owners may find their files revisited as part of a broader, data-driven review.

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Why this matters even if you never had PPP or EIDL

If your business claimed the Employee Retention Credit (ERC), you may be thinking, “That’s SBA. ERC is IRS. Different program.”

Different agency, yes, but the enforcement mindset is converging:

• Re-examine old claims
  
• Use data patterns to identify targets
  
• Pause, freeze, deny, or claw back when something looks wrong
  
• Increase penalties for bad actors (including promoters)
  

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That’s precisely what we’ve been watching in ERC.

The IRS already implemented a moratorium on processing new ERC claims starting September 14, 2023, a public acknowledgement that the ERC system had become saturated with questionable and aggressive filings. 
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Minnesota is the proof of the new era: “the filing phase is over; the proof phase has begun.”

The Minnesota action matters because it demonstrates something business owners and advisors need to internalize:

The government is not “moving on” from pandemic relief. It is auditing, reviewing, and enforcing… years later.

ERC is especially vulnerable to this shift because:

1. Eligibility is complex (especially around partial suspension and gross receipts testing).
   
2. Many claims were filed by pop-up “ERC mills” that may not defend work under scrutiny.
   
3. The dollars are big, and big dollars attract audits.
   
   

The IRS has also rolled out multiple compliance and correction pathways, like withdrawal options for unpaid claims and voluntary disclosure programs for taxpayers who need to unwind an improper ERC. 
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These aren’t “nice-to-have” initiatives. They’re part of a system preparing for large-scale enforcement.
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The hidden connection: PPP, EIDL, and ERC live in the same data universe

Even though PPP/EIDL and ERC are different programs, they share a common audit reality:

They touch payroll, headcount, wages, and eligibility narratives that can be cross-checked.

PPP and ERC, in particular, have a natural audit trail:

• Same employer payroll records
  
• Same quarters and wages in the same time window
  
• Overlap rules that require careful wage allocation
  
  

When the government demonstrates it can identify patterns and freeze access for thousands of cases in a single state, it’s a reminder that data-driven screening is the new standard and that older filings can be revisited as analytics, risk models, or enforcement priorities shift.

What ERC filers should assume in 2026 (even if your claim was “legit”)

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If you claimed ERC, here’s the safest baseline assumption:

1. Your ERC can be questioned years after it was filed or paid.
   
2. The burden of proof is on you to document eligibility and wage calculations.
   
3. If your preparer disappears, you still own the outcome.
   
4. Defense costs can become the real pain, even before any repayment decision.
   
   

This is the part many business owners miss: an ERC audit is not just “send paperwork and move on.” It can become a sustained legal and technical response, especially when the IRS believes the claim aligns with a risk pattern and common audit triggers.

The IRS has extended its enforcement toolkit around ERC

ERC enforcement has not been trending toward “leniency.” It’s been trending toward longer review horizons and more structured enforcement.

For example, Congress enacted enforcement provisions affecting ERC and, for certain ERC quarters, extended the IRS’s time to examine claims (a longer statute window) compared to the standard timeline businesses are used to.

Separately, the IRS’s public posture has consistently emphasized risk screening, improper-claim volume and targeting aggressive promotion behavior.

Put simply: the “easy credit” era is over. The scrutiny era is here.

What should you do right now?

The goal isn't to panic; it's to prepare so that the "bad actors" don't ruin your peace of mind.

• ✅ Audit-Ready Files: Don't rely on memory. Ensure you have contemporaneous evidence of government orders or declines in gross receipts.
• ✅ Identify Your Defender: If an audit notice arrives, do you have a dedicated professional ready to respond, or are you relying on a "pop-up" firm that may no longer exist?
• ✅ Address Potential Errors: If you suspect a preparer was too aggressive, the IRS has published pathways (like withdrawal options) to correct the record before enforcement reaches your door.

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Harbor Shield ERC: Turning Uncertainty into Predictability

Minnesota’s story changes the emotional math for ERC filers because it makes enforcement feel real and immediate. The rational response isn’t panic, it’s preparation.

Harbor Shield ERC is built around a simple idea:‍

Don’t wait for a letter to discover you need specialized defense. Lock it in up front.

For many ERC filers, the most painful part of a challenge is not just repayment risk, it’s the sudden requirement to fund experienced representation and sustained responses under deadline pressure.

That’s why Harbor Shield ERC is designed to be:

• A proactive audit-readiness move for serious operators
  
• A hedge against unpredictable defense costs
  
• A way to avoid scrambling when enforcement intensifies
  

And this is where your price point lands with clarity:

~$2,500 per quarter to pre-secure funded, ERC audit attorney defense capacity (up to program limits) becomes easy to understand against:

• six-figure ERC claims
  
• multi-month audit timelines
  
• high-cost specialized representation
  

In other words, it’s a lever, not a liability.
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The clean narrative: Minnesota is the preview, ERC is the next arena

Minnesota is not “about PPP only.” It’s about posture.

• The government is revisiting pandemic relief at scale.
  
• Agencies are willing to freeze access while they review.
  
• Intermediaries and recipients can both get pulled into enforcement.
  
  

If that’s true for PPP/EIDL, there is no reason to assume ERC filers are “too old,” “too small,” or “not worth it.”

The cleanup phase is here. ERC is not exempt.

Next step: Don’t wait to find out whether your claim is in the “low risk” bucket. Build an audit defense plan now, while you still have time to act deliberately.

Build Your ERC Audit Defense Plan

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.