IRS has big warning ahead of tax filing

IRS has big warning ahead of tax filing

The Internal Revenue is urging people to avoid scams currently making the rounds on social media.

One of the scheme, according to the IRS, encourages people to use tax software to manually fill out their W-2 form and provide false income information. This scheme suggests people make up a large salary and witholdings from a phony employer in an effort to get a large refund, sometimes as much as five figures.

“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.”

READ MORE: IRS changes tax deadline to Oct. 16 for some Alabamians

Another scam is 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 variation of this scheme involves people making up fictional employees employed in their household and using Schedule H (Form 1040), Household Employment Taxes, to try claiming a refund based on false sick and family wages they never paid. The form is designed to report household employment taxes if a taxpayer hired someone to do household work and those wages were subject to Social Security, Medicare or FUTA taxes, or if the employer withheld federal income tax from those wages.

The IRS is working with states and tax industry companies to be on the lookout for this scheme and others. In addition, the IRS is working with payroll companies and large employers – as well as the Social Security Administration – to verify W-2 information. People who are caught violating the laws face a wide range of penalties, including a frivolous return penalty of $5,000 and run the risk of criminal prosecution.