Business owners should seek tax advice from trusted professionals rather than social media posts, the IRS advised this week. The agency issued an alert about online schemes that have led to taxpayers filing inflated returns claiming credits for which they are not eligible.
The IRS specifically warned businesses about the Fuel Tax Credit and the Sick and Family Leave Credit. Compliance efforts have been increased regarding false or questionable returns related to these and other tax credits promoted on social media.
"Scam artists and social media posts have perpetuated a number of false and misleading claims that have tricked well-meaning taxpayers into believing they’re entitled to big, windfall tax refunds," IRS Commissioner Danny Werfel stated in bulletin IR-2024-139.
"These bad claims have been caught during our fraud review process," he added. "Taxpayers who filed these claims should realize they’ve been tricked, and they face an extensive review process and a long potential wait if they’re owed a refund for other things."
The federal Fuel Tax Credit is intended for off-highway business and farming use. To be eligible, taxpayers need a business purpose and qualifying activity, such as running a farm or purchasing aviation gasoline. Most taxpayers do not qualify for this credit.
However, the IRS has seen an increase in fictitious claims on Form 4136, Credit for Federal Tax Paid on Fuels. Promoters of incorrectly claiming the Fuel Tax Credit often charge inflated fees but risk compliance action by the IRS due to heightened scrutiny on this scam.
Additionally, misinformation has circulated regarding credits for Sick and Family Leave. This credit was available to self-employed individuals for 2020 and 2021 during the pandemic but is no longer available for the 2022 or 2023 tax years. Despite this, there are repeated instances of incorrect usage of Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals.
To avoid legal action, taxpayers must submit amended returns within 30 days of receiving an IRS letter or notice if inappropriate claims were filed. Claims based on frivolous positions identified by the IRS—or reflecting intent to delay or impede tax administration—are subject to a $5,000 penalty per return claiming an improper credit.
