The IRS is cautioning individuals to steer clear of scams circulating on social media. One of these schemes involves using tax software to manually complete a W-2 form with fake income details. This ploy advises individuals to fabricate a high salary and withholdings from a fictitious employer to secure a sizable refund, sometimes exceeding five figures.
Acting IRS Commissioner Doug O’Donnell expressed concern that unsuspecting taxpayers may be enticed into a perilous trap that could expose them to financial and legal ramifications. O’Donnell stated, “We are observing indications of an uptick in this scam, and we are concerned about the potential consequences for innocent taxpayers.” The IRS and Security Summit allies are reiterating that there is no clandestine method to obtain free money or a substantial refund. O’Donnell advised people not to fabricate their income and file a fraudulent tax return in the anticipation of receiving a significant refund.
The IRS is collaborating with tax industry
A different scheme involves individuals exploiting Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to acquire a credit based on earnings received as an employee instead of a self-employed individual. These credits were obtainable to self-employed individuals in 2020 and 2021 during the pandemic, but they are not applicable for tax returns in 2022.
A modified version of this ploy entails individuals concocting imaginary employees that they purportedly employed in their household and utilizing Schedule H (Form 1040), Household Employment Taxes, to file for a refund based on counterfeit sick and family wages that they never disbursed. The form’s purpose is to disclose household employment taxes if a taxpayer engaged someone for household labor and those wages were accountable to Social Security, Medicare, or FUTA taxes, or if the employer retained federal income tax from those wages.
The IRS is collaborating with tax industry firms and states to remain vigilant against this and other ploys. Furthermore, the IRS is partnering with significant employers and payroll corporations, in addition to the Social Security Administration, to authenticate W-2 data. Individuals who are found guilty of contravening the laws may face diverse penalties, including a $5,000 frivolous return penalty and the possibility of criminal prosecution.