Beware of Tax Scams: IRS Issues Consumer Alert on Inaccurate Refund Claims

In a recent consumer alert, the Internal Revenue Service (IRS) has raised concerns about the prevalence of tax scams and misleading social media advice, which have led thousands of taxpayers to file inflated refund claims. The IRS urges taxpayers to be vigilant and informed to avoid falling victim to these scams, particularly those involving the Fuel Tax Credit, the Sick and Family Leave Credit, and household employment taxes.

Understanding the Scam

The IRS has identified several key areas where taxpayers are being misled into making inaccurate claims:

1. Fuel Tax Credit:

   • What It Is: This credit is intended for off-highway business use, such as farming or operating certain types of equipment.

   • The Scam: Many taxpayers mistakenly believe they qualify for this credit, leading to erroneous claims. Eligibility is limited to specific business activities, and most taxpayers do not qualify.

2. Credits for Sick Leave and Family Leave:

   • What It Is: These credits were available for self-employed individuals during the pandemic years of 2020 and 2021.

   • The Scam: Incorrectly using Form 7202 to claim credits for 2023 is a common issue. These credits are not applicable for income earned as an employee and are not valid for the 2023 tax returns.

3. Household Employment Taxes:

   • What It Is: These taxes apply to household employers who pay wages to domestic employees.

   • The Scam: Some taxpayers fabricate fictional household employees to claim false sick and family medical leave wages, leading to improper refunds.

The Consequences

Falling for these scams can have serious repercussions:

• Delayed Refunds: Claims will undergo extensive review, delaying any legitimate refunds.

• Financial Penalties: Improper claims can result in steep fines.

• Audits and Criminal Action: In severe cases, fraudulent claims may lead to audits or even criminal charges.

Steps to Take If You've Been Misled

If you realize you've made an incorrect claim, it’s crucial to take corrective action:

1. Verify Eligibility: Double-check the criteria for any credits claimed.

2. Consult a Professional: Speak with a trusted tax preparer to review your return.

3. Amend Your Return: If necessary, file an amended return to remove ineligible claims and avoid potential penalties.

The IRS’s Advice

IRS Commissioner Danny Werfel emphasized the importance of relying on credible sources for tax advice. “Scam artists and social media posts have perpetuated a number of false and misleading claims that have tricked well-meaning taxpayers into believing they’re entitled to big, windfall tax refunds,” he said. “These bad claims have been caught during our fraud review process. Taxpayers who filed these claims should realize they’ve been tricked, and they face an extensive review process and a long potential wait if they’re owed a refund for other things.”

Protect Yourself

Here are some tips to protect yourself from tax scams:

• Stay Informed: Keep up-to-date with IRS announcements and guidelines.

• Verify Sources: Only trust advice from reputable sources, such as certified tax professionals.

• Be Skeptical: If something sounds too good to be true, it probably is.

Contact us for more information.

Stay informed and vigilant to ensure your tax filings are accurate and legitimate.