Small Business Taxes & Management

Special Report


IRS Warns of New Filing Season Scams

 

Small Business Taxes & ManagementTM--Copyright 2023, A/N Group, Inc.

 

The IRSS issued a consumer alert today to warn taxpayers of new scams that urge people to use wage information on a tax return to claim false credits in hopes of getting a big refund.

One scheme, which is circulating on social media, 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 is 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.

The IRS along with the Security Summit partners in the tax industry and the states, are actively watching for this scheme and others. In addition, the IRS works with payroll companies and large employers--as well as the Social Security Administration--to verify W-2 information.

The IRS is seeing signs this scam is increasing, and worries 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. The IRS and Security Summit partners remind people there is no secret way to get free money or a big refund. People should not make up income and try to submit a fraudulent tax return in hopes of getting a huge refund.Two variations of this scheme are also being seen by the IRS; both involve misusing Form W-2 wage information in hopes of generating a larger refund:

While not cited by the IRS currently, another scheme is to increase your income in order to claim or increase your claim to the Earned Income Tax Credit. Any action that creates a bigger refund through fraudulent means will result in penalties and possibly criminal action. The same rules generally apply at the state level.

The IRS reminds taxpayers who try this that they face a wide range of penalties. This may include a frivolous return penalty of $5,000. Filers also run the risk of criminal prosecution for filing a false tax return.

For anyone who has participated in one of these schemes, there are several options that the IRS recommends. People can amend a previous tax return or consult with a tax professional.

 


Copyright 2023 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536


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--Last Update 03/08/23