⭕ They may sound legit, but these tax claims are bogus
⭕ Bad advice could cost you big $$$
⭕ IRS warns about 'advice' on social media

With 2024 winding down, it won't be long before you have to start thinking about filing your taxes.

No one likes paying taxes and that is why so many keep falling for bogus tax scams, schemes and hacks that are peddled on the internet and social media.

These threats are present year-round but the approach of the 2025 tax filing season means that misinformed influencers and outright scammers will intensify efforts to persuade the public to take their bad advice.

New Jersey residents are particularly vulnerable because we live in a high tax and high cost of living state. It can be very enticing to figure out a way to keep more of your money.

They may sound legitimate, but these wildly inaccurate tax claims could cost you a lot of money or even jail time if you falsely inflate your tax refund when filing your taxes with the IRS.

"The growth of bad tax advice on social media continues to grow, luring unsuspecting taxpayers into filing bad tax returns,” said IRS Commissioner Danny Werfel. “We urge people to do some research before falling for these scams."

New tools to identify false claims

The IRS recently announced the formation of the Coalition Against Scam and Scheme Threats (CASST). It's made up of representatives from the IRS and state tax agencies, tax professionals, tax software companies and the financial industry.

CASST, the IRS says, is working to combat growing scams and protect taxpayers against filing inaccurate tax returns fueled by social media advice.

"Increasing awareness of new and emerging tax schemes on social media is one part of a multi-pronged effort by the CASST coalition to combat tax scams and fraud.
Scams that promise easy money through claiming inaccurate credits or other schemes are seen in social media and in other places," the IRS said in a statement.

Some producers of misleading content on social media are driven by a criminal profit motive, while others are simply trying to gain attention and clicks, with little regard for the risks it poses to their followers.

How these scams work

A lot of these scams promise easy money through claiming inaccurate credits.

Among the more common schemes are the "Fuel Tax Credit" and so-called "pig-butchering" scams that involve investments in fake cryptocurrencies that ultimately leave the victims penniless.

"Common wisdom dictates that if it sounds too good to be true, it often is, and that’s especially with some of the crazy ideas about taxes being spread on social media,” Werfel said. “Social media platforms are rife with influencers making claims about tax credits or deductions that stretch the truth or are outright lies, aimed at gaining themselves clout or pushing up their views. At the same time, this puts their audience’s tax returns and personal finances at risk."

The IRS warns about relying on someone talking in their car or their kitchen about a non-existent tax hack.

What to watch out for on social media

Beware of various tax filing season hashtags and social media topics that can lead to inaccurate and potentially fraudulent information.

A common theme among many of these examples involves people trying to use legitimate tax forms for the wrong reason.

Falling victim to these scams, or knowingly participating in one, could subject you to an IRS audit and expensive fines; in some cases, you could be subject to federal criminal prosecution and imprisonment.

Common scams

Self Employment Tax Credit

Promoters on social media have made misleading claims that taxpayers – particularly self-employed individuals and gig economy workers -- can get up to $32,000 through the so-called “Self Employment Tax Credit.”

In reality, there is no “Self Employment Tax Credit”; rather, scammers are advising taxpayers to incorrectly use Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to improperly claim the specialized and very limited Sick Leave and Family Leave Credit on their income.

People who were self-employed could claim credits for Sick and Family Leave only for limited COVID-19 related circumstances in 2020 and 2021; the credit is not available for 2023 or 2024 tax returns. The IRS has a detailed set of FAQs describing the very technical requirements for meeting this provision of the law.

Household employment taxes

In a variation on the “Self-Employment Tax Credit” scheme, taxpayers are being advised to “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.

Fuel Tax Credit

This specialized credit is designed for off-highway business and farming use.

Taxpayers need a business purpose and a qualifying business activity such as running a farm or purchasing aviation gasoline to be eligible for the credit.

The vast majority of individual taxpayers do not qualify for the Fuel Tax Credit.

It is only for businesses that use certain types of fuel (not for the gas people put in their car).

Yet promoters increasingly advise ineligible taxpayers to claim it, and then the promoters line their own pockets by charging the individual a hefty fee.

Inflated income and withholding

This scheme encourages people to use tax software to manually fill out Form W-2, Wage and Tax Statement, and include false income information.

Scam artists suggest people make up large income and withholding figures, as well as the employer from which it’s coming.

They then instruct people to file the bogus tax return electronically in hopes of getting a substantial refund – sometimes as much as five figures – due to the large amount of withholding.

Claim of Right

In this long-seen scheme, taxpayers are advised to file tax returns and attempt to take a deduction equal to the entire amount of their wages.

Promoters advise them to label the deduction as “a necessary expense for the production of income” or “compensation for personal services actually rendered.”

The deduction is based on a complete misinterpretation of the Internal Revenue Code and has no basis in law.

The IRS has seen hundreds of thousands of dubious claims like these, leading to refunds being delayed and the need for taxpayers to show legitimate documentation to support their claims – which they often don’t have.

How to verify claims

The IRS says if you have questions or doubts about the legitimacy of a particular tax credit, you should review the many resources available on IRS.gov or seek advice from a qualified tax professional.

"Instead of looking to shady or ill-informed influencers on social media," the IRS says, "A better option for taxpayers to learn how to properly use tax forms and claim credits is to go to IRS.gov and follow IRS social media channels.

The IRS encourages the public to report improper and abusive tax schemes, as well as tax return preparers who knowingly prepare improper returns, including “ghost preparers.”

To report an abusive tax scheme or a tax return preparer, people should mail or fax a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers, and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:
Internal Revenue Service
Lead Development Center MS7900
1973 N. Rulon White Blvd
Ogden, UT 84404
Fax: 877-477-9135

Alternatively, taxpayers and tax professionals may report the information to the IRS Whistleblower Office for possible monetary award.

Taxpayers can also report scams to the Treasury Inspector General for Tax Administration or the Internet Crime Complaint Center. The Report Phishing and Online Scams page at IRS.gov provides complete details.

Report a correction 👈 | 👉 Contact our newsroom