Taxes 2023: These bogus “tax hacks” could lead to serious trouble with the IRS

A so-called tax hack touted on social media could land you in big trouble with the IRS, as well as fail to deliver the juicy refund it claims to deliver.

The agency warns taxpayers not to fall for advice urging them to use tax software to populate W2s with false income information, with some scammers suggesting that people fabricate large earnings and withhold numbers to get large refunds.

W2s are tax forms sent by employers to employees that show their annual income and the amount of federal income tax withheld, pension contributions, and more. An employee uses that information to fill out his Form 1040 — his individual income tax return — which helps calculate whether he owe a refund or, alternatively, owe money to the IRS. The larger the withholding, the possibly larger the refund.

But making up false information about a W2 is a surefire way to get in trouble with the IRS, which receives copies of W2s from employers and compares them to the records filed on individuals’ 1040s, tax and security experts said. .

The scam comes during a year when tax refunds are due 10% lower than a year earlier, while many households are struggling with high inflation.

“There are all these individuals [on social media] They pretend to be tax experts, but they’re really cheating the public by exposing these tax hacks,” says Amir Tarighat, CEO of cybersecurity firm Agency. “They’re not really selling anything other than, ‘Follow me for more tricks.'”

“It’s definitely bad advice,” he added.

Those tricks can lead to tax violations, leaving the taxpayer with fines and fines from the IRS. The agency warned that people who use such tactics could face a range of penalties, including a $5,000 fine for filing a frivolous return and the risk of criminal prosecution for filing a false tax return.

Scammers can bank that tax returns can beat the clock by filing a return before the IRS can verify matching records from an employer’s W2, said Keith Hall, a CPA and CEO of the National Association for the Self-Employed.

“If you file a tax return with W2 information including withholding, the IRS will process that pretty quickly, ahead of that matching process,” Hall said. But, he added: “The people who do [falsify information] will eventually be caught.”

He added: “If someone says you can get a big payback by making up a W2, run away as fast as you can.”

Fake employees and a non-existent tax credit

A few other variations of the W2 tax scam are also emerging, according to the IRS.

One version involves people making up fake employees who supposedly work in their households and filing Schedule H for domestic work taxes. The idea is to demand a refund based on fake sick and family wages that they never actually paid.

A second variant is using Form 7202 for sick and family leave credits for certain self-employed people — but this tax credit was only available to self-employed people in 2020 and 2021 during the pandemic. The tax credit has now expired and is no longer available for tax year 2022, the IRS said.

“[T]there’s no secret way to get free money or a big refund,” IRS Acting IRS Commissioner Doug O’Donnell said in a statement. “People shouldn’t make up income and try to file a fraudulent tax return hoping for a huge refund to get .”

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