The annual tax filing season is prime time for scammers. But of late, tax crooks are working year-round.
Technology makes the expansion of their nefarious jobs easier.
The Internal Revenue Service recently issued an alert about a growing number of fraudulent tax schemes circulating on social media. The popular ones right now, according to the IRS, promote the misuse of tax credits such as the Fuel Tax Credit and the Sick and Family Leave Credit.
These scams have led thousands of taxpayers to file inaccurate or frivolous returns, often paying the bad tipsters posing as tax experts for help doing so. Their tax trouble escalates from there.
Bad, and expensive, tax advice: When the IRS catches the illegal filings, the taxpayers get the bad news that the refunds they expected from the wrongly claimed credits are denied.
That’s then generally followed by even worse news. Their fraudulent filing also includes steep penalties.
Since 2022, the IRS says this surge in questionable refund claims fueled by misleading social media posts has led to the tax agency imposing more than 32,000 penalties that have cost duped taxpayers collectively more than $162 million.
“These schemes are not only misleading but can cost taxpayers dearly,” said James Clifford, IRS Director Return Integrity and Compliance Services. “People who follow this advice could end up with rejected claims and a penalty of up to $5,000 in addition to any other penalties that might apply. So far, the IRS has imposed over 32,000 penalties costing taxpayers more than $162 million. It’s in the taxpayer’s best interest to stay informed.”
Real credits, but not for all filers: Tax con artists often take a real tax law, then falsely tell their targets that they can claim it.
The IRS sees this a lot in connection with tax breaks meant for self-employed individuals or businesses, like the fuel and family leave false filings now making the tax scam rounds.
In addition to falsely promoting on social media that everyone qualifies for these tax breaks, the scams often also have other common traits. They typically —
- Make promises of “easy” or “fast” refunds that can be claimed with minimal documentation.
- Provide instructions for scam victims to file amended returns, even if they did not originally qualify for the credits.
- Encourage the targeted taxpayers to ignore IRS letters or respond with false information when questioned about the filing.
Scam aftermath: Taxpayers who fall for these cons and send the IRS a return with false claims may face serious consequences.
Any legitimate refund they are due could be delayed.
The refund associated with the illegal claim is denied.
Once caught, the filer could face a $5,000 civil penalty under Internal Revenue Code Section 6702 for filing a frivolous return.
Finally, once the IRS starts investigating you, its agents tend to be thorough. You also could be subject to further IRS examination and enforcement action.
How to avoid becoming a tax scam victim: If you believe you’ve been misled about a tax claim and/or filed an incorrect return, the IRS says there are some steps you should take as soon as possible.
Amend the wrong tax return by filing Form 1040-X, Amended U.S. Individual Income Tax Return.
If you get an IRS letter or notice about the questionable claim, respond promptly.
If you’re feeling overwhelmed by your mistake, find a reputable tax professional who can help you clear up your bad filing quickly and with as little financial damage as possible.
Also, report any suspected tax scam to the IRS by emailing details to phishing@irs.gov. You also can file a complaint with the Treasury Inspector General for Tax Administration (TIGTA).
You can stay up to date on tax scams at IRS.gov’s Tax Scams page. The ol’ blog also reports on tax scams when there’s word about new schemes.
The best way to avoid being a victim is to be cautious about tax advice offered online. Don’t immediately follow it. Check it out first.
A good way to do that is to follow respected internet tax sites. In addition to my posts, the IRS publishes helpful information via its multiple social media accounts. A good one to follow is @IRStaxsecurity on X (formerly Twitter; yes, I still call it that) for official posts on the latest scam information.
Tax Felon Friday: When the IRS does catch promoters of bad tax advice, regardless of how they disseminate the information to lure their victims, it will prosecute them. In some cases, Uncle Sam is able to recover some of the revenue it and taxpayers lose to the crooks.
But your best move is to be proactive and prevent yourself from becoming a tax scam target.
You can get an idea of recent notable tax schemes and what to be on the lookout for by checking out the ol’ blog’s Tax Felon Friday page.
If you want more tax crime posts, including items published long before I gave them a special end-of-week feature, you can peruse, what else, the tax crimes category. You’ll find this post at the top of that collection right now, so just scroll down for more.
Now, go out and enjoy your weekend, including socializing with your internet friends.
But don’t fall for those folks seeking to become your new tax BFF by offering fake promises that could get you into deep, and costly, tax trouble with the IRS.
You also might find these items of interest:
- How to report tax scams and fraud
- IRS implements filing season changes to detect tax scams and return fraud
- Fake business tax credits, bogus charities, phishing and smishing: All make IRS’ 2024 Dirty Dozen list
