The IRS is alerting taxpayers that if they claimed any of three particular tax credits, they might need to make changes to their returns.
It’s possible that many Americans were misled by dishonest tax preparers or false information on social media, making them believe they were eligible for tax refunds provided by the credits. But doing so can result in a delay in reimbursements or possibly jail time.
This year, the Fuel Tax Credit, the Sick Leave and Family Leave credits, and the household employment taxes are the three tax credits that are producing problems.
Should you have applied for any of these credits and you lack the necessary paperwork to prove your eligibility, your refunds will probably be blocked and an audit request will be made.
You should determine whether you need to file an amended return by speaking with a reputable tax preparer in order to avoid this.
“Scam artists and social media posts have perpetuated a number of false and misleading claims that have tricked well-meaning taxpayers into believing they’re entitled to big, windfall tax refunds,” IRS Commissioner Danny Werfel said in a statement.
The Fuel Tax Credit
The Fuel Tax Credit is available for taxpayers who own a business and have off-highway and farming fuel use.
You can lower your taxable income for manufacturing, construction, farming, and landscaping businesses under the credit. If the money was used for commercial purposes, the credit is intended to balance the taxes levied by the government on gasoline and diesel.
School bus companies, certain non-profits, and people who utilize fuel for forklifts in warehouse operations or as commercial fishers are all eligible.
The Fuel Tax Credit is one of the most common tax frauds, which is why the IRS has previously included it on its Dirty Dozen list. When Americans misuse their credit, it’s usually because they follow the advise of dishonest financial “experts” or because they want to, with the hope of receiving an inflated return.
Sick Leave and Family Leave Credit
The Sick Leave and Family Leave credits are two more that Americans routinely abuse to get a higher refund for the previous tax year.
The only people who are actually eligible are those who were self-employed for 2020 and 2021 during the pandemic, though. In fact, no one qualifies this year because the IRS said the credit is not available for 2023 tax returns.
Despite this, many are incorrectly using Form 7202 to attempt to get the credit based on income earned as an employee and not as a self-employed individual.
Previously, the credits were available to employers who paid sick and family leave. That eligibility only went to employers with less than 500 employees.
Household Employment Taxes
This year, a common error made by filers on their tax forms was to create fictitious household employees and then file a Schedule H (Form 1040). In theory, this enables you to get reimbursed for wages you never paid for fictitious sick and family medical leaves.
Actually, only people who hire nannies, housekeepers, landscapers, or other domestic workers are subject to these taxes.
That being said, you are not eligible for any refunds based on taxes paid if you do not actually have any workers working from home.
“These improper claims have been fueled by social media and people sharing bad advice,” Werfel stated. “Scammers frequently feed on people’s hopes and attempt to use the complexities of the tax code to persuade individuals that there are undiscovered methods for obtaining sizable refunds. These three credits serve as an example of how crucial it is to carefully check the tax return for accuracy before filing and to heed the advice of a reliable tax professional rather than a dubious source they came across on social media or a fly-by-night preparation.
Taxpayers may have seen a record number of scammers targeting them this year. These scams frequently take the form of influencers posing as financial experts who promise to file taxes and provide a sizable refund even if the victim is ineligible.
According to Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, “various tax credits that help boost a refund make the rounds on social media, taxpayers pick up on the idea and file using the advice, and the IRS has to sort through claims that are incorrectly reported.” Newsweek was previously informed of this.
You can be required to pay up to $5,000 per return for each frivolous claim if you decide not to make any changes to your tax return and you incorrectly filed for one of these tax credits.
“Ignore the trendy credits on social media you may see, because most apply to business circumstances, not those of personal tax filers,” Beene stated. Most importantly, it’s critical to cooperate with the IRS right away to resolve any discrepancies if you discover that you reported something incorrectly. Crucially, the IRS must recognize that this was an inadvertent mistake and not an attempt to manipulate the tax system in order to obtain a bigger refund.”
If you have an IRS inquiry related to any of these credits or any IRS communication of any sort, contact COTTS LAW – A Tax Resolution Law Firm, today. Call us at 361-866-3819 or visit www.cottslaw.com, and set up a time to meet with us to discuss your IRS Matter.
