The IRS noted two tax credit programs that were misused most often: the Fuel Tax Credit and the Sick and Family Leave Credit.
The tax agency blamed bad actors posing as tax experts on online platforms for the surge in questionable refund claims over the past years, while clarifying that most taxpayers do not qualify for the credits.
The Fuel Tax Credit is available for those who own or operate a business and use fuel for business purposes, such as farming and commercial fishing. The fuel credit is not available for personal use.
Meanwhile, the Sick and Family Leave Credit is available for small and midsize employers that provided wages to workers who took sick or family leave between April 1, 2020, and March 31, 2021, during the COVID-19 pandemic.
The agency said that online scams and misinformation have led thousands of taxpayers to file inaccurate or frivolous returns, often resulting in the denial of refunds and steep penalties.
“These schemes are not only misleading but can cost taxpayers dearly,” said IRS Return Integrity and Compliance Services Director James Clifford.
“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.”
Taxpayers who submit false claims may also be subjected to further examination and enforcement action by the IRS.
Some of the common traits of such scams include social media posts claiming everyone can qualify for certain tax credits, encouragement to respond to IRS letters with false information, and promises of easy or fast refunds with little documentation.
The agency advised taxpayers who believe they have been misled and consequently filed a false return to amend the return as soon as possible and quickly respond to any IRS notices.
“Seek help from a reputable tax professional,” it said.
“The IRS urges all taxpayers to be cautious when relying on social media posts. Always verify claims with credible sources or consult a qualified tax professional.”
Other scams in the list include fake charities, swindlers posing as helpful third parties offering to create an online account with the IRS, false self-employment tax credit, and improper household employment taxes.
The IRS also warned about email and text scams targeting taxpayers. These messages attempt to lure targets into providing personal and financial information, which can eventually result in identity theft.
“As a reminder, never click on any unsolicited communication claiming to be from the IRS, as it may surreptitiously load malware. This may also be a way for malicious hackers to load ransomware that keeps the legitimate user from accessing their system and files,” the agency said.
“In the first half of the year, there were nearly 300 data breaches reported impacting as many as 250,000 clients,” the IRS said.
