Tax Blog/Blawg

It should come as no surprise that for a significant segment of the population, social media is rapidly replacing traditional print and television media as the primary source of news and information.  That trend is troubling enough because of questions about accuracy, objectivity and competency.  But perhaps an even more troubling trend is the increasing reliance on social media for advice on matters of import, particularly those that delve into traditional fields of expertise that involve legal issues. Relying on, “advice” on federal income tax matters from so called “tax experts” on social media can have severe or even disastrous consequences.

Because so much of what appears on social media is unattributed or attributed to an unverifiable source, there are significant opportunities for bad-intentioned actors to prey upon the uninformed.  In the tax world, we are seeing an example of this when self-anointed “tax experts” are promoting to their followers that they should claim certain credits on their tax returns intended to result in windfall refunds. 

On May 14, 2024, the IRS issued a consumer alert, IR-2024-139, warning taxpayer they may be scam victims if they follow this “dubious” social media advice, and warning of increased enforcement activity. The IRS also is advising taxpayers who fell victim to these scams to accurately amend their returns or else.

The IRS alert identified three credits that scam artists recommended taxpayers use to boost their refunds: (1) the Fuel Tax Credit; (2) the Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals; and (3) Inventing a Fictional Household Employee and Claiming a Refund Based on False Sick and Family Medical Leave Wages Never Paid.  These scams all involve legitimate tax credits, but without explanation or clarification that they are limited to very specific scenarios. 

The IRS has begun freezing refunds and issuing letters to taxpayers who filed returns with questionable refund claims.  Many of these letters will request that taxpayers verify their identity and supply additional information to substantiate the validity of the credits.  The IRS recommends that taxpayers follow the advice in the letters and promptly submit an accurate amended return to avoid penalties and future enforcement action.

The May 14th consumer alert is the newest development in increased enforcement initiatives related to abuses of tax relief provisions established by the CARES Act, American Rescue Plan Act, and other COVID-19 related policies.  Congress enacted the provisions allowing for credits and deductions related to sick leave and family leave to relieve some of the financial burden caused by the COVID-19 pandemic.  Most of the recent pandemic related enforcement has involved the abuses seen in the Employee Retention Credit program.  However, the IRS now appears to be poised to begin ensuring individual taxpayers complied with these pandemic-era programs.