The Internal Revenue Service (IRS) has issued a consumer alert to warn taxpayers of new scams that use wage information on a tax return to claim false credits in hopes of getting a big refund.
One scheme circulating on social media encourages people to manually fill out Form W-2, Wage, and Tax Statement and include false income information. Scam artists suggest people make up significant income and withholding figures and the employer it is coming from. They 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 a large amount of withholding.
The IRS and 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.
“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,” said Acting IRS Commissioner Doug O’Donnell. “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.”
The IRS warns that two variations of this scheme are also being seen; both involve misusing Form W-2 wage information in hopes of generating a larger refund. One variation involves people using 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 2022 tax returns. A similar variation involves people making up fictional employees employed in their household and using Schedule H, Household Employment Taxes, to try claiming a refund based on false sick and family wages they never paid.
The IRS reminds people who try this that they face many penalties. This may include a frivolous return penalty of $5,000. Filers also risk 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 trusted tax professional.
With National Consumer Protection Week starting on Monday, the IRS and Summit partners warn people not to fall for these scams.
