Why the IRS Paid Out $93M in COVID Tax Fraud Refunds

Fake companies. Real checks. And one paralyzed the ringleader. The FBI just blew the lid off what it’s calling the largest known COVID tax credit fraud scheme in U.S. history, and it’s the kind of staggering case that’ll leave every CPA double-checking their compliance files, and maybe their client lists. So, what really went down between June 2020 to December 2024? Let’s break it down, from the fraud playbook to the IRS blind spots, to what professionals should take away from the government’s $93 million oopsie. 

A Pandemic, A Loophole, and Fraudsters

When Congress passed the Families First Coronavirus Response Act in 2020, it was a lifeline. Businesses could claim "sick and family wage credits" to cover payroll costs for employees sidelined by COVID-19. Sounds like a win-win, right?

Enter Kristerpher Turner, aka "Kris," "Red," "Bullet," and apparently, criminal mastermind. According to the indictment unsealed in June 2025, Turner and his crew of three Southern California associates, Toriano Knox, Kenya Jones, and Joyce Johnson, took that credit system for a $247 million ride.

Here's how they rolled:

• They set up fake businesses or hijacked real ones that weren’t eligible for credits.
• Then they filed fraudulent tax forms claiming employee wage reimbursements they never paid.
• The IRS, trusting the paperwork, issued refund checks totaling a cool $93 million.
• Turner took a cut between 20–40% from each fraud client, like a shady version of a tax prep fee.

Recruitment was low-budget but effective. Friends, family, and even romantic partners were roped in by Knox and Jones to hand over personal details for fake filings. The money flowed in, and nobody blinked, until they did.

Snitches Get Stitches

By August 2023, the IRS started asking questions. That’s when, according to the FBI, things got seriously criminal, even for this crew. Knox and Jones allegedly tried to murder Turner, the very person who started the whole operation. The motive? He was suspected of cooperating with investigators. Turner was shot multiple times in broad daylight in a Gardena office park and survived, but is now permanently paralyzed. So much for honor among fraudsters.

How did the IRS miss it?

Well, the IRS was moving fast and trusting paperwork during the pandemic. The system was designed to prioritize speed over scrutiny, and scammers knew it. There were no employees to cross-check, no payroll audits required upfront, and fake EINs were treated like the real deal. With thousands of legitimate claims flooding in, a few hundred fraudulent ones slid under the radar. Fraudsters also used real bank accounts, real mailing addresses, and sometimes even real companies with no legitimate claim to the credits. It was like finding a counterfeit $100 in a stack of stimulus bills; good luck catching it in time.

A Cheat Sheet for the Future

This case should be a flashing red warning sign for tax authorities. Here's what needs to change:

• Smarter AI, not just bigger forms: The IRS should use pattern recognition and cross-referencing payroll tax data (like 941 filings) with claimed credits in real time.
• Stricter onboarding for business credit claims: Think KYC but for entities, verify business activity, real payroll, and employee counts.
• Flag unusual deposit behaviors: When 148 businesses in Southern California are suddenly raking in six-figure refunds with no prior filing history? That’s a red flag, not a green light.

And let’s not forget inter-agency collaboration; this case only came together because the FBI, IRS-CI, and Treasury Inspector General connected the dots. Imagine if those dots were connected earlier.

Lessons for Tax Professionals

This story isn’t just another headline. It’s a wake-up call. Here’s what professionals should learn from it:

• Watch who you're representing: If a client’s new “consulting company” suddenly wants to claim pandemic credits with zero W-2s? Run, don’t walk.
• Document everything: The IRS loves clean records. Fraudsters, not so much. Keep detailed audit trails and use verification tools.
• Stay current on IRS scam trends: This wasn’t a one-off. Billions were looted through ERC scams, PPP fraud, and shady labs. Staying informed is part of your due diligence.
• Call out suspicious behavior: Your license isn’t just for tax prep, it’s a badge of trust. If something feels off, escalate it.

Remember: financial professionals were some of the first lines of defense during COVID relief. They’re also going to be on the front lines when clawbacks and audits come knocking.

Where This Is Going

The defendants were officially indicted on June 11, 2025. Each faces up to 20 years per fraud charge. Jones and Knox, if convicted of attempted murder and firearm use, could see life behind bars. But the real story isn’t just about prison time. It’s about what happens when emergency relief meets weak oversight. COVID taught us a lot about resilience, about risk, and now, about red flags with dollar signs. So, the next time a client pitches you a "totally legal" refund hack, just remember even “Bullet” can’t outrun the IRS forever. Smart reads. Big moves. Subscribe now and never miss a beat in accounting, tax, or finance.