Dozens of major tax-related organizations and companies support the new Scam and Scheme Threats task force, including H&R Block, where I’m a tax pro. This initiative to stop tax scams will focus on informing taxpayers how to avoid being tricked into filing fraudulent returns. I sometimes have to clean up the mess these scams create. Like taxpayers being charged exorbitant tax prep fees for returns that get big refunds. Except the returns are fraudulent. So, they paid way too much for tax prep, the credits were denied, they now owe money and maybe there’s a fraud penalty too. It’s ugly.
Convened at the request of IRS Commissioner Danny Werfel, the coalition of federal and state tax agencies along with software and financial companies as well as key national tax professional associations agreed to a three-pronged approach. They will work to expand outreach and education about emerging scams, develop new approaches to identify potentially fraudulent returns at the point of filing and create infrastructure improvements to protect taxpayers as well as federal, state and industry tax systems.
Among their initiatives are letting people know about ghost preparers and how you probably don’t qualify for the Fuel Tax Credit!
Ghost preparers
If your tax preparer doesn’t sign a return, well, there’s probably a reason for that. They don’t want their name on it because they’re probably advising the taxpayer to do something dicey or fraudulent. So, if / when the IRS asks about, it’ll be completely up to the taxpayer to explain. Who may not even understand what the ghost preparer told them to claim. Yet the taxpayer’s name and signature is on the return so they are responsible for it. And the ghost preparer is nowhere to be seen.
Fuel Tax Credit
The Fuel Tax Credit is only for off-highway equipment and farming. If that doesn’t apply to you, don’t claim it. This credit will almost certainly be heavily monitored by the IRS this year for fraud. There are probably people living in apartments in cities trying to claim this. Don’t be that person.
Other scams involve bogus credits for sick leave and family leave and for household employment taxes paid.
Household employment taxes: Taxpayers “invent” fictional household employees and then file Schedule H (Form 1040), Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid.
This credit will also be watched by the IRS. If you are high income and have nannies, this might apply. Otherwise, it probably doesn’t.
Yes, it’s a jungle out there. If a tax credit seems too good to be true, it almost certainly is. If you have questions, have a reputable tax prep company do your taxes. Stop tax scams. Don’t be a victim.