STATEN ISLAND, N.Y. — The Internal Revenue Service (IRS) is warning taxpayers not to fall for scams, which have been circulating on social media, encouraging falsification of wage information.
One of the popular schemes encourages people to manually fill out Form W-2, Wage and Tax Statement, with inflated income and withholding figures and false employer information in hopes of receiving a large refund. Scam artists advertise that the bogus filing can yield as much as five figures in returns.
As part of National Consumer Protection Week, which kicked off on Monday, the IRS along with Security Summit partners are closely monitoring tax filings for possible scams.
“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 said. “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 IRS has observed two variations of the W-2 scheme.
One version involves individuals claiming a credit on Form 7202 – Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals – based on income earned as an employee and not as a self-employed individual. These credits were available for self-employed individuals for 2020 and 2021 during the pandemic, but are not available for 2022 returns.
A similar variation of the scheme involves people creating fictional employees employed in their household and using Schedule H (Form 1040), Household Employment Taxes, to try claiming a refund based on false sick and family wages they never paid. The form is designed to report household employment taxes if a taxpayer hired someone to do household work and those wages were subject to Social Security, Medicare or FUTA taxes, or if the employer withheld federal income tax from those wages, according to the IRS.
People who participate in the schemes face a wide range of penalties, including a frivolous return penalty of $5,000 or criminal prosecution for filing a false tax return.
If you have already participated in a tax scheme, the IRS recommends amending the tax return or consulting with a trusted tax professional.
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