April 2024 Foodman Website and JD Supra
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On 4/8/24, the IRS continued updating the Dirty Dozen list for 2024 including how social media tax advice can lead taxpayers to trouble as inaccurate or misleading tax information is circulating.  IRS is re-issuing a warning, just like they did in 2023,  regarding trusting social media tax advice that can lure taxpayers and tax professionals into compromising tax situations. Consequently, putting taxpayers and the tax professional community at risk of losing money, personal information, data and more. “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,” said IRS Commissioner Danny Werfel. “There are many ways to get good tax information, including @irsnews on social media and from trusted tax professionals.”  That said, taxpayers who intentionally file forms with false or fraudulent information can face profound consequences, including potentially civil and criminal penalties as well as a frivolous return penalty of $5,000.

Social Media Tax Advice Fraudulent Schemes circulating on the internet are:

  • Fraudulent advice on Form W-2: encourages taxpayers 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 its 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.
  • Fraudulent Form 7202: a variation of the W-2 scheme, encourages taxpayers 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: a variation of the W-2 scheme, encourages taxpayers to invent fictional household employees and then file Schedule H (Form 1040), Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid.
  • Form 8944 scheme: this is the Preparer e-file Hardship Waiver Request. Wildly inaccurate claims made about this form include its use by taxpayers to receive a refund from the IRS, even if the taxpayer has a balance due. Form 8944 is for tax professional use only and it is intended for tax return 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.

Fraudulent form filing, and bad advice is trending on social media platforms

Inaccurate social media tax advice on TikTok and other social media platforms can lead to fraud via schemes that encourage people to submit false, inaccurate information in hopes of getting a refund. IRS is aware of various filing season hashtags and social media topics leading to inaccurate and potentially fraudulent information. The central theme involves people trying to use legitimate tax forms for the wrong reason.

Taxpayers are ultimately legally responsible for all the information on their income tax return, regardless of who prepares it

Taxpayers ought to choose their tax preparer carefully. There are many Preparers who don’t have the requisite professional credentials and every year Taxpayers are hurt financially because they choose the wrong Preparer. There are unregulated Tax Return Preparers that represent themselves as “Qualified” Tax Preparers. A regulated Tax Preparer is not the same thing as an unregulated Tax Return Preparer. So, what should a Taxpayer do? Taxpayers should verify Tax Preparer qualifications through this IRS link:  https://irs.treasury.gov/rpo/rpo.jsf   This IRS directory allows Taxpayers to:

  • Verify the Preparer’s qualifications. If your Tax Preparer is not in the IRS Directory, walk away.
  • Determine if the Tax Preparer has a Preparer Tax Identification Number (PTIN). All paid tax preparers must have a PTIN. By law, paid preparers must sign returns and include their PTIN.
  • Check the Preparer’s History. CPAs can be checked with the State Board of Accountancy, Attorneys can be checked with the Local State Bar Association and Enrolled Agents can be checked at: https://www.irs.gov/tax-professionals/verify-the-status-of-an-enrolled-agent

Have you chosen your tax preparer carefully?

Who is your tax preparer? ©