The Internal Revenue Service has hit taxpayers with over $162 million in penalties for claiming fraudulent tax credits they heard about through social media.
The claims involve illegitimate claims for tax breaks such as the Fuel Tax Credit and the Sick and Family Leave Credit. The IRS has seen a surge in such claims in the past five years and warned last year about abusing them. Social media posts promoting such schemes have prompted thousands of taxpayers to file inaccurate, frivolous returns, often leading to the denial of tax refunds and hefty penalties.
Many of the posts falsely claim that all taxpayers are entitled to tax credits they don’t actually qualify for, such as those aimed at self-employed people or businesses. The IRS regularly publishes and updates a list of frivolous positions on IRS.gov that could lead to penalties.
“These schemes are not only misleading but can cost taxpayers dearly,” said James Clifford, IRS director return integrity and compliance services, in a statement Monday. “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.”
The schemes often share some traits in common, stemming from social media posts claiming virtually everybody qualifies for certain tax credits. The scammers often promise “easy” or “fast” tax refunds despite minimal documentation and instruct taxpayers to file amended tax returns, even if they didn’t originally qualify for claiming the credits. The scams encourage taxpayers to ignore IRS letters or respond to them with false information.
Taxpayers who file false claims can face negative consequences, including delayed tax refunds, denied refund claims, and a $5,000 civil penalty under Section 6702 of the Tax Code for filing a frivolous return. They can also find themselves subject to future IRS examinations and enforcement actions.
