The IRS has dished out more than $162 million in penalties to taxpayers who have fallen for fraudulent tax schemes circulating on social media that promote the misuse of certain tax credits, the agency said on Monday.
As a result, thousands of taxpayers have filed inaccurate or frivolous returns that falsely claim the Fuel Tax Credit and the Sick and Family Leave Credit, often resulting in the denial of refunds and steep penalties, the IRS stated.
Since 2022, the agency has seen a surge in questionable refund claims fueled by misleading social media posts and bad actors posing as tax experts. Many of the posts falsely claim that all taxpayers are eligible for credits they don’t actually qualify for, such as those meant for self-employed individuals or businesses.
The IRS routinely publishes and updates a list of frivolous positions on IRS.gov that could lead to the imposition of penalties.
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“These schemes are not only misleading but can cost taxpayers dearly,” James Clifford, IRS director of return integrity and compliance services, said in a statement on Sept. 8. “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.”
According to the IRS, these scams often have common traits:
- Social media posts that claim everyone qualifies for certain tax credits.
- Promises of “easy” or “fast” refund with minimal documentation.
- Instructions to file amended returns, even if you didn’t originally qualify for the credits.
- Encouragement to ignore IRS letters or respond with false information.
Taxpayers who submit false claims may face such consequences as:
- Delayed refunds.
- Denied refund claims.
- A $5,000 civil penalty under Internal Revenue Code Section 6702 for filing a frivolous return.
- Subject to further IRS examination and enforcement action.
Taxpayers who believe they have been misled or filed an incorrect return should:
- Amend the tax return as soon as possible using Form 1040-X, Amended U.S. Individual Income Tax Return.
- Respond promptly to any IRS letters or notices.
- Seek help from a reputable tax professional or the IRS’s official resources at IRS.gov.
If you suspect a tax scam, the IRS says to report it by emailing phishing@irs.gov or file a complaint with the Treasury Inspector General for Tax Administration.
Photo credit: wingedwolf/iStock
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Tags: Income Taxes, IRS, social media, tax credits, tax scam, tax scams, Taxes
