IRS: Beware This New W-2 Tax Scam
We recently highlighted a few tax scams that American taxpayers should be watching out for.
Well, add another to the list.
The Internal Revenue Service just issued a consumer alert warning taxpayers about multiple variations of a new W-2 tax scam meant to prey on people who want a big tax refund this year.
Given that this scam is rapidly spreading on social media, it’s vital that Americans immediately learn what to look out for.
About the New W-2 Tax Scam
Here’s he basic version of this W-2 tax scam:
People on social media say that you should manually fill out Form W-2, Wage and Tax Statement using tax software. As you do, you’re suggested to fabricate not just a large amount of taxable income and withholding figures, but even the employer you’re earning that income from. After that, you’re instructed to file the tax return electronically. The supposed payoff: A fat tax return of up to five figures.
One variation of the W-2 tax scam involves a now-expired tax credit. Scammers are telling W-2 employees to use Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals to claim a credit that’s actually based on income earned as a self-employed individual. Moreover, the credits were a COVID-era creation that expired after the 2021 tax year.
The other variation involves Schedule H (Form 1040), Household Employment Taxes. This form typically is used to report household employment taxes for people hired to do household work. In this blatant farce, scammers suggest creating fictional people and saying they’re employed in your household. Then they say to use Schedule H to claim a refund based on family wages that were never actually paid.
Don’t Try to Sneak One Past the IRS
All of these schemes are punishable via penalties ranging from a $5,000 frivolous return penalty to possible prosecution.
The IRS already works with payroll companies, large employers and the Social Security Administration to verify W-2 information, so would-be fraudsters already had a low chance of success. But the chances of getting caught have only become higher. The IRS says it — along with Security Summit partners in the tax industry, and individual states — is now looking out for this specific W-2 tax scam.
“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,” Acting IRS Commissioner Doug O’Donnell says. “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.”
The Surest Way to Avoid IRS Audits or Penalties? Trust the Pros.
If you try to defraud the IRS, you’re putting yourself at risk. But even honest taxpayers can run afoul of Uncle Sam if they don’t know what they’re doing. Innocent mistakes can get you audited too.
McManamon & Co. offers expert tax services to small and midsize businesses. We can ensure you’re better protected from the most prominent tax scams, take care of your annual filing duties and build a tax strategy that you can follow year-round to maximize your savings.
Let us get you through the tax season scam-free. Call McManamon at 440.892.8900 or contact us online today.
Tags: fraud, McManamon, McManamon & Co., small business, small business taxes, tax news, tax scams, taxes | Posted in McManamon & Co., taxes