The Internal Revenue Service (IRS) has received thousands of false tax credit claims filed by taxpayers who sought to obtain greater refunds than they really deserved. This situation was detected by the IRS and led to taking measures to reduce such scams, including suspending refunds and requesting taxpayers to submit additional documentation to support their claims.
Basically, if you applied for a tax credit and do not want to be the target of an IRS investigation, you must submit the appropriate documentation to prove that you actually deserve that money.
The Problem With Falsely Claimed Tax Credits
In a statement released by the IRS, the agency highlighted that many taxpayers fraudulently claimed tax credits on their federal returns, especially during the 2023-2024 filing season. This incorrect information led them to seek a larger refund than they were legally entitled to, and many of them received it.
One of the most falsely claimed tax credits includes the Fuel Tax Credit, Sick and Family Leave Credit, household employment taxes, among others.
“Scammers and social media posts have perpetuated a number of false and misleading claims that have misled well-meaning taxpayers into believing they are entitled to large unexpected tax refunds,” said IRS Commissioner Danny Werfel. “These false claims have been detected during our fraud review process. The taxpayers who filed these claims should realize that they have been misled and that they face an extensive review process and a possible long wait if they are due a refund for other things.”
Actions Taken by the IRS in Response to Fraudulent Returns: $5,000 in Penalties
The IRS has detected tens of thousands of fraudulent returns through its fraud review process. In response, it has frozen refunds and notified suspicious taxpayers to submit additional documentation to support their claims. Those who can prove that they are creditors of that money will see their refund arrive in a matter of days once the IRS approves it.
Those who fail to prove the veracity of their tax returns may face fines of up to $5,000 and be subject to subsequent audits and even criminal charges for improper or fraudulent claims.
The IRS recommended in its statement that taxpayers review the guidelines or consult with a financial advisor when filing an amended return. The agency will not accept the amended return until the additional documents have been provided and the processing of the original return has been completed.
What Does the IRS Do When It Finds a Return Suspicious of Identity Theft?
When the IRS finds a return suspected of fraud, it does not process the refund immediately and opens an investigation. During this process, it asks the taxpayer to verify their identity to ensure that the return has not been filed using stolen information. After verification, which may delay the issuance of the tax refund, the veracity of the numbers and amounts written on those returns is verified.
