WASHINGTON – The Internal Revenue Service (IRS) is warning taxpayers about a scam promoters and social media are marketing that can cause people to file false claims.
Their pitch offers something they call the “Self-Employment Tax Credit” as a way for self-employed people and gig workers to get big payments for the COVID-19 pandemic period. Similar to misleading marketing around the Employee Retention Credit, inaccurate information suggests many people qualify for the tax credit and payments of up to $32,000 when they actually do not, the IRS said Monday in a statement.
The underlying credit referred to by promoters and in social media isn’t called the “Self-Employment Tax Credit,” it’s a much more limited and technical credit called Credits for Sick Leave and Family Leave.
The IRS warns that many people simply do not qualify for this credit and that it is closely reviewing claims coming in under this provision so people filing claims do so at their own risk.
“This is another misleading social media claim that’s fooling well-meaning taxpayers into thinking they’re due a big payday,” IRS Commissioner Danny Werfel said in the statement. “People shouldn’t be misled by outlandish claims they see on social media. Before paying someone to file these claims, taxpayers should consult with a trusted tax professional to see if they meet the very limited eligibility scenarios.”
Previously: IRS releases nationwide warning about tax scam
Credits for Sick and Family Leave are available only for very specific COVID-19 related circumstances in 2020 and 2021; the credit is not available for 2023 tax returns. Yet, the IRS has seen repeated instances where taxpayers are incorrectly using Form 7202 to incorrectly claim a credit based on income earned as an employee and not as a self-employed individual.
The IRS has a detailed set of FAQs describing the very technical requirements for claiming Credits for Sick and Family Leave.
The scheme is similar to the aggressive promotion that has been used to scam taxpayers into claiming the Employee Retention Credit. Both are technical credits that have been mischaracterized by some as a way for average taxpayers to get a big government payment.
“In reality, these are very limited credits that have a variety of complex requirements before people can qualify,” the IRS said.
Taxpayers should consult with a trusted tax professional before filing for any of these credits, or any others they see promoted on social media, the IRS warns.
“These improper claims have been fueled by social media and people sharing bad advice,” Werfel said. “Scam artists constantly prey on people’s hopes and try to use the complexity of the tax system to convince people there are secret ways to get a big refund.
“All of these scams illustrate that it’s important to carefully review the tax return for accuracy before filing and rely on the advice of a trusted tax professional, not someone trying to make a quick buck or a questionable source on social media,” he said.
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