Tax statements are crucial not only to taxpayers, but also tax collectors who rely on the forms' information to verify what people put on their returns.
Some crooks, however, are trying to slip false filing data by the Internal Revenue Service, and are entrapping taxpayers in the process.
The IRS today issued a warning about a new scam involving fake W-2 forms, the document used by taxpayers and tax departments to verify a taxpayer's earnings. The W-2 info is the main earnings data entered on annual tax returns by millions of filers.
Con artists, in many cases via social media, are encouraging people to use tax software to manually fill out a new Form W-2, Wage and Tax Statement, replacing the individual's actual earnings with false income information.
They then are told they can use the fake W-2 amounts to get bigger refunds, some reaching five figures, than what they legitimately are due.
Real forms, fake data, and filings: As is often the case in tax schemes, con artists take real forms and misuse them.
Companies, or the payroll services they use, send W-2s to millions of taxpayers each year with details of the wages that they earned the prior year.
In addition to the income data, the W-2 includes data on taxes withheld on that income, as well as Federal Insurance Contributions Act taxes, aka the amounts that go to Social Security and Medicare programs, taken out of the workers' pay. W-2 forms also may contain information on workplace benefits and tip income if gratuities as part of your employment.
The IRS and its private and public sector tax partners in the Security Summit say this filing season they are seeing an increase in two schemes in which taxpayers are urged to alter their W-2 information. The fake wage data then is used by filers in the hopes of getting a larger tax refund.
One variation involves people using Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to claim a credit based on income earned as an employee, and not as a self-employed individual. These credits were available for self-employed individuals for 2020 and 2021 during the pandemic. However, this tax break is no longer in effect and cannot be claimed on 2022 tax returns.
The second similar variation involves people making up fictional household employees and using Schedule H (Form 1040), Household Employment Taxes, to try claiming a refund based on false sick and family wages they never paid.
This authentic IRS form is designed to report household employment taxes if a taxpayer hired someone to do household work and those wages were subject to Social Security, Medicare, or federal unemployment taxes, or if the employer withheld federal income tax from those wages. You can read more about filing Schedule H in my post Household help could mean more tax work for employers.
Conned taxpayers pay the price: While crooks might be able to convince some taxpayers to mess with their W-2 data, and falsely file forms using that erroneous info, the schemes are not likely to succeed.
And in addition to not getting a bigger refund, the conned taxpayers could face additional monetary and criminal charges for using illegally tweaked W-2 data.
The IRS and state tax officials compare the various W-2 data they get from employers with what taxpayers enter on their annual returns. When the fake W-2 information doesn't match the real numbers supplied by employers, taxpayers could face charges for filing false tax returns.
"We are seeing signs this scam is increasing, and we worry that innocent taxpayers could be at risk of being tempted into falling into a trap that puts them at risk of financial and criminal penalties," said Acting IRS Commissioner Doug O'Donnell.
"[T]here is no secret way to get free money or a big refund. People should not make up income and try to submit a fraudulent tax return in hopes of getting a huge refund," added O'Donnell.
The IRS can assess a wide range of filing penalties, including a fine of up to $5,000 for submitting a frivolous tax return. Filers also run the risk of criminal prosecution for filing a false tax return.
Making tax amends: If you've filed a return with wrong W-2 data, consider contacting a legitimate tax professional. That tax pro can help you amend your incorrect tax return.
And if you've been a victim of this or any other tax scams, or are targeted by con artists, let the IRS know. You can report fraudulent misuse of the IRS name, logo, forms, or other IRS property by calling the Treasury Inspector General for Tax Administration (TIGTA) toll-free hotline at (800) 366-4484, or by going to the TIGTA website.
Your and others' reports help the agency track, and track down, the crooks.
You also might find these items of interest:
- 6 tips on how to file your taxes when you're missing tax statements
- More tax forms information at 2022's Talking Tax Forms and Tax Forms 2023.
- FTC's annual fraud report is a good reminder to be alert for tax filing season scams
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