How do you use social media? I get suggestions from neighbors for home repair services and local restaurants. I also check out cat videos. Way too many cat videos.
I also interact with reputable tax pros I know, leading to innumerable interesting and informative online tax discussions. Again, this is with trained tax professionals, whom I’ve known online (and some in real life) for years.
I do not, however, use social media to get tax tips from strangers touting, shall we say, innovative ways to reduce taxes.
But some folks do. And the Internal Revenue Service says that in too many cases, those folks are getting bad tax advice.
The latest such incident is the marketing of a tax break that promoters and social media bad actors describe as the Self Employment Tax Credit.
The spiel, which is false, tells people who were self-employed and/or gig workers during the COVID-19 pandemic period that the credit will get them big payments. How big? As much as $32,000.
It won't.
Kernel of truth, harvest of bad info: As if often the case in tax scams, con artists and unscrupulous promoters take a true tax break and twist it.
People who were self-employed during the pandemic can claim Credits for Sick and Family Leave, but only for limited COVID-19 related circumstances in 2020 and 2021. The tax credit is not available for 2023 tax returns.
To qualify for the Sick and Family Leave Credits, self-employed workers had to meet a variety of technical reasons in 2020 and 2021 that didn’t allow them to work, including caring for an individual subject to a quarantine or isolation order.
However, victims are falling prey to the bad social media tax credit advice and improperly claiming it now.
The IRS says it is seeing repeated instances where taxpayers are using Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals (excerpt shown below), to incorrectly file for the credit based on income earned as an employee, not as a self-employed worker.
New tax issue, same technique: The self-employment credit tactic is similar to misleading marketing around the Employee Retention Credit (ERC), where promoters targeted businesses. In the ERC case, some company owners were convinced by aggressive promoters to incorrectly file for that coronavirus-related tax break.
The so-called self-employment tax credit approach and vibe is the same. Both are technical credits that have been mischaracterized by some as a way for average taxpayers to get a big government payment.
In reality, notes the IRS, both the ERC and self-employed sick and family leave claims are very limited credits that have a variety of complex requirements before people can qualify.
“This is another misleading social media claim that’s fooling well-meaning taxpayers into thinking they’re due a big payday,” said IRS Commissioner Danny Werfel. “People shouldn’t be misled by outlandish claims they see on social media. Before paying someone to file these claims, taxpayers should consult with a trusted tax professional to see if they meet the very limited eligibility scenarios.”
This latest scenario also is part of this year’s Dirty Dozen, the IRS' annual list of the top 12 tax scams.
In adding bad online tax advice to the 2024 list, the IRS noted that unlike online plumbing hacks or creative makeup tips, wrong tax information can be much more costly. When the IRS disallows the bad online advice claims and demands the correct due tax, along with penalty and interest charges, it’s the taxpayer who will end up being a victim a second time.
Get correct advice from reputable tax pros: The IRS has a detailed set of frequently asked questions describing the very technical requirements for meeting the specific paid leave provisions as they relate to self-employed individuals.
If the above descriptive phrase “very technical requirements” caught your eye, your best move is to check with a trusted tax professional before filing for any other questionable tax claim circulating on social media.
“Scam artists constantly prey on people’s hopes and try to use the complexity of the tax system to convince people there are secret ways to get a big refund,” said Werfel. “All of these scams illustrate that it’s important to carefully review the tax return for accuracy before filing, and rely on the advice of a trusted tax professional, not someone trying to make a quick buck or a questionable source on social media.”
You also might find these items of interest:
- Why tax credits rule
- Picking the perfect tax pro for your filing (and more) needs
- Tax scam improperly uses clean energy tax credit purchases
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