The Internal Revenue Service (IRS) issued a consumer alert advising taxpayers to consult with trusted tax professionals instead of relying on social media for tax advice. This comes in response to a misleading social media trend promoting a non-existent “Self-Employment Tax Credit,” leading taxpayers to file false claims.
The IRS announcement highlighted that promoters on social media were falsely marketing the Self-Employment Tax Credit as a way for self-employed individuals and gig workers to receive substantial payments for the COVID-19 pandemic period. This misinformation mirrors previous deceptive marketing efforts seen with the Employee Retention Credit, where many individuals were misled into believing they could qualify for tax credits and payments up to $32,000 when they did not.
Contrary to these claims, the credit being promoted on social media is not actually a Self-Employment Tax Credit but a much more limited and technical credit known as the Credits for Sick Leave and Family Leave, which only a few individuals are eligible for, according to the agency. The IRS warned that taxpayers following social media advice and filing claims under this provision would be subject to scrutiny.
IRS Commissioner Danny Werfel emphasized the importance of consulting with a trusted tax professional before filing any questionable tax claims promoted on social media. He cautioned taxpayers against being misled by outlandish claims and urged them to verify their eligibility with a professional.
The IRS also mentioned instances where taxpayers incorrectly used 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 rather than as a self-employed individual. To qualify for the Sick and Family Leave Credits, self-employed workers must meet specific technical criteria from 2020 and 2021, such as being unable to work due to caring for someone under a quarantine or isolation order.
In addition to the Self-Employment Tax Credit misinformation, the IRS cautioned against scams involving the Fuel Tax Credit and household employment taxes, warning taxpayers of the surge in dubious claims resulting in delayed refunds and the need for additional documentation. The agency emphasized the importance of consulting with professionals to avoid falling victim to tax scams.
Earlier this month, the IRS also alerted tax professionals to be vigilant about new and evolving schemes using phishing emails and artificial intelligence (AI) to steal sensitive information. The agency urged professionals to watch out for scams targeting taxpayers with increased frequency, including those utilizing AI to access personal information.
In May, the IRS warned that individuals who fell victim to online tax scams could face fines of up to $5,000, emphasizing the risks associated with filing false tax returns. Those charged with such offenses risk jail time and hefty fines.
Katabella Roberts contributed to this article.
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