IRS Warns of 'Wildly Inaccurate Tax Advice' on Social Media
IRS | Social media | Scam | Bad tax advice | July 3, 2024
This Week's Quote:
"Whatever you are, be a good one."
- Abraham Lincoln
Bogus claims on social media are nothing new. But when it comes to taxes, misleading information on social media can lead to financial or even legal problems, the IRS warns.
Social media—things like Facebook, Instagram and TikTok—can be used to circulate “wildly inaccurate tax advice,” the agency said. Some claims involve urging people to misuse common tax documents like Form W-2 or more obscure ones like form 8944, a technical e-file form not commonly used by most filers.
Both schemes encourage people to submit false inaccurate information in hopes of getting a refund.
“Social media is an easy way for scammers and others to try encouraging people to pursue some really bad ideas, and that includes ways to magically increase your tax refund,” IRS Commissioner Danny Werfel said in a statement. “There are many ways to get good tax information, including @irsnews on social media and from trusted tax professionals. But people should be careful with who they’re following on social media for tax advice.
“Unlike hacks to fix a leaky kitchen sink or creative makeup tips, people shouldn’t rely on made-up ways on social media to patch up their tax return and boost their refund,” he added.
The IRS cited two bogus claims that are currently circulating on social media:
Fraudulent advice on W-2s
This scheme encourages people to use tax software to manually fill out Form W-2, Wage and Tax Statement, and include false income information. In this W-2 scheme, scam artists suggest people make up large income and withholding figures, as well as the employer it’s coming from.
Scam artists then instruct people to file the bogus tax return electronically in hopes of getting a substantial refund—sometimes as much as five figures—due to the large amount of withholding.
There are two other variations of the W-2 scheme. Both involve misusing Form W-2 wage information in hopes of generating a larger refund:
Fraudulent Form 7202
This scheme involves encouraging people to use Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to claim a credit based on income earned as an employee and not as a self-employed individual. These credits were available for self-employed individuals for 2020 and 2021 during the pandemic; they are not available for 2023 tax returns.
Fraudulent Schedule H
Another scheme encourages people to invent fictional household employees and then file Schedule H-Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid.
The IRS is “actively watching” for these schemes and said it works with payroll companies and large employers—as well as the Social Security Administration—to verify W-2 information.
Form 8944 scheme
Another example of bad advice circulating on social media involves Form 8944, Preparer e-file Hardship Waiver Request. Wildly inaccurate claims made about this form include its use to receive a refund from the IRS, even if the taxpayer owes money.
While Form 8944 is a legitimate IRS tax form, it is only used by professional tax preparers who are requesting a waiver so they can file tax returns on paper instead of electronically. It is not a form the average taxpayer can use to avoid tax bills, the IRS said.
There are consequences for filing false or fraudulent tax returns, including civil penalties of as much as $5,000 and criminal prosecution.
Credit goes to Leada Gore, published April 9, 2024 by CPA Practice Advisor.
Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.
This Week’s Author, Belinda Stickle