IRS Warns Taxpayers of New W-2 Filing Scams

by | Apr 17, 2023 | IRS

The Internal Revenue Service today released a consumer notice to caution taxpayers to new scams that encourage people to file bogus tax credits using wage information in the hopes of receiving a sizable refund.

One scam that is going around on social media invites people to manually fill out the Form W-2, Wage and Tax Statement, using tax software and to include phony income information. Scammers advise people to make up significant income and withholding amounts, as well as the workplace from which they are coming, as part of the W-2 scheme. Then con artists advise victims to electronically file the false tax return in the hopes of receiving a sizeable refund – often as high as five figures – as a result of the significant amount of withholding.

The IRS is actively on the lookout for these and other schemes, as are the Security Summit partners in the tax sector and the states. In order to validate W-2 data, the IRS also collaborates with large employers, payroll services, and the Social Security Administration.

The IRS and Summit Partners urge people not to fall for this. These scams are addressed as part of the National Consumer Protection Week begins in early March.

Acting IRS Commissioner Doug O’Donnell said, “We are seeing signs that this scam is growing, and we are concerned that innocent taxpayers could be tempted into falling into a trap that puts them at risk of financial and criminal penalties.” There is no trick to getting free money or a sizable refund, the IRS and Security Summit partners warn the public. In an effort to file a false tax return and receive a sizable refund, people shouldn’t make up income.

The IRS has also observed two variants of this method, both of which utilize Form W-2 wage data in an effort to maximize a refund:

One alternative involves people claiming a credit based on income received as an employee and not as a self-employed person by completing Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. During the epidemic, these credits were accessible to self-employed people for tax years 2020 and 2021; they are not accessible for tax years 2022.

Similar variations include people inventing fictitious household employees and attempting to obtain a refund using Schedule H (Form 1040), Household Employment Taxes, based on fictitious sick and family wages they never paid. The form is intended to record home employment taxes if a taxpayer employed someone to do household work and those wages were subject to Social Security, Medicare, or FUTA taxes, or if the employer withheld federal income tax from those wages.

People who attempt this are warned by the IRS that they could face a number of penalties. A $5,000 frivolous return fine could be a part of this. Criminal prosecution is another possibility for those who file fake tax returns.

The IRS suggests a number of options for anyone who took part in one of these schemes. A prior tax return can be amended, or people can consult a reputable tax expert.

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About Daniel T.A. Cotts

Daniel is a skilled Tax Attorney who moved to Corpus Christi in 2019 to expand his practice and return to Texas. With over 26 years of experience in the legal profession, Daniel brings a wealth of knowledge of Taxation, IRS Dispute representation & resolution, Estate Planning, Accounting, and Business & Contract Law to South Texas.


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