While taking advantage of unearned tax credits is not new, the surge of businesses on social media promoting fraudulent tax credits has boomed. Since the introduction of pandemic-era relief programs, the number of businesses and bad actors selling tax relief has become a continued focus for the Internal Revenue Service (IRS).
In an alert, the IRS reports an increase in the number of questionable tax credits the agency is seeing. James Clifford, the director of Return Integrity, said, “These schemes are not only misleading but can cost taxpayers dearly. 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, the rise in unqualified tax credit claims stems from increased effort across social media to boost businesses selling tax-reduction opportunities, legitimate or otherwise. Most often, marketers presenting themselves as tax professionals or experts draw in taxpayers with the lure of easy money for tax credits for which they may not qualify.
Because the IRS is on the lookout for fraudulent tax credits, applying for an improper Fuel Tax Credit claim might increase the odds that your return is flagged for review or potentially, or even an IRS audit. Unscrupulous businesses selling tax credits usually charge a fee upfront to review your circumstances and to amend or prepare your return. Tax service scammers also market heavily to those in debt who may not understand the complexity of an Offer in Compromise (OIC).
Regardless of the type of scam, the IRS points out common features of offers that are probably too good to be true, including:
If you know you were scammed into a false tax credit or intentionally claimed one, take immediate action to amend your return to remove the fake tax credits and speak with your tax attorney. If you fail to do so, the IRS may assess thousands of dollars in penalties and interest.
If you filed a fraudulent tax return, our tax attorneys offer strategic guidance for recognizing and resolving challenges with the IRS. Contact us to set up a consultation or call us at 440-250-9709. We serve clients across the U.S. and internationally from our offices in Cleveland and Chicago.
For additional support, check out our comprehensive Understanding Tax Fraud ebook. This resource is a helpful tool for anyone to gain greater understanding of tax fraud, tax evasion, or money laundering before engaging with the IRS.