Tax credit scams could cost filers $5,000
The Internal Revenue Service is warning tax filers to watch out for certain scams that prey on people seeking tax credits.
The agency is highlighting schemes, most often used on social media sites such as Tiktok, that show people how to falsify income information on their W-2 statements.
In what’s being called a
“W-2 scheme,” scammers suggest people make up large income and withholding figures and their employer. Filers are told to file the bogus tax return electronically “in hopes of getting a substantial refund — sometimes as much as five figures,” the IRS said.
“We are seeing signs this scam is increasing, and we worry that innocent taxpayers could be at risk of being tempted into falling into a trap that puts them at risk of financial and criminal penalties,” acting IRS Commissioner Doug O’donnell said. “There is no secret way to get free money or a big refund.”
There are two variations on the same scheme, both of which involved misusing the W-2 wage information form in order to land a larger refund.
One uses Form 7202 aimed at self-employed individuals to claim a tax credit based on income earned as an employee and not as a self-employed individual. These credits, the IRS warns, only were available in 2020 and 2021 during the pandemic.
Another scam involves tax filers making up fictional workers employed in their household and using Schedule H to claim a refund based on false sick and family wages they never paid.
To anyone who flirts with filing false information, the IRS reminds them that those who are caught can face fines up to $5,000.
Should people fall for one of these Tiktok scams, the agency said tax filers can amend their tax return or consult with a tax pro.