The Internal Revenue Service (IRS) issued a consumer alert, given ongoing concerns about a series of tax scams and inaccurate social media tips that led thousands of taxpayers to make inflated refund claims last tax season.
The IRS issued the warning, to taxpayers not to fall for these scams that focus on the Fuel Tax Credit, the Family, and Sick Leave Credit and taxes on domestic employment, the IRS has seen handfuls of claims that are dubious in which it seems that taxpayers are making the claim for credits for which they are not eligible, which delays the refund process and the need for taxpayers to prove that they have legitimate documentation to support these claims.
What Are These Tax Scams About?
The IRS continues to urge taxpayers to avoid these types of scams, as myths persist that these are ways to get a giant refund, many of these scams stood out during the annual Dirty Dozen series this spring, including the Fuel Tax Credit scam, bad advice on social media and “ghost preparers”.
Taxpayers who fell into the networks of scammers should follow the steps to verify their eligibility for the claim, some taxpayers could also suffer from heavy financial penalties, possible follow-up audits and even criminal actions for claims that do not take place, the IRS encourages people to review the guidelines, talk to a trusted tax preparer and, in some cases, file an amended return to remove claims for which they are not eligible and avoid future penalties.
“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 bad claims have been detected during our fraud verification process. Taxpayers who filed these claims should realize that they have been misled and that they face an extensive verification process and a possible long wait if they are due a refund for other things.” Problematic claims include the Fuel Tax Credits, Paid Sick and Family Leave Credit, and domestic employment taxes.
The IRS has detected three common themes that keep cropping up among these uncollectible refund claims. They lead to legitimate tax provisions, but are limited to very specific situations. The vast majority of related claims that come in don’t qualify.
Fuel Tax Credit
This specialized credit is designed for off-road commercial and agricultural use. Taxpayers must have a business purpose and a qualifying business activity, such as running a farm or buying aviation gasoline, to be eligible for the credit. Most taxpayers do not qualify for this credit.
Paid Sick and Family Leave Credits
This specific credit is available for freelancers for 2020 and 2021 during the pandemic period; the credit is not available for 2023 tax returns, the IRS is reviewing repeated cases in which taxpayers incorrectly use Form 7202, Paid Sick and Family Leave Credit for certain self-employed, to incorrectly request a credit that is based on income earned as an employee and not as a self-employed.
