The Internal Revenue Service (IRS) has issued a consumer alert warning taxpayers about new scams that involve claiming false tax credits by using wage information on tax returns.
The scam artists suggest that people use tax software to manually fill out Form W-2 and include false income information. They instruct people to file the bogus tax return electronically in hopes of receiving a large refund due to the large amount of withholding.
“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 says. “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.”
It is warning people not to fall for these scams, and it is actively working with payroll companies and large employers, as well as the Social Security Administration, to verify W-2 information. The IRS reminds people that there is no secret way to get free money or a big refund and warns that people should not make up income and try to submit a fraudulent tax return in hopes of getting a huge refund.
The IRS is seeing two variations of this scheme. One involves people using Form 7202 to claim a credit based on income earned as an employee and not as a self-employed individual. The other involves people making up fictional employees employed in their household and using Schedule H to try to claim a refund based on false sick and family wages they never paid. The IRS reminds people who try this that they face a wide range of penalties, including a frivolous return penalty of $5,000, and run the risk of criminal prosecution for filing a false tax return.
O’Donnell warns 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 to be vigilant and not to fall for these scams.
With National Consumer Protection Week starting soon, the IRS and Summit partners hope to raise awareness and protect taxpayers from these schemes.