More Tax Scams Revealed

The Internal Revenue Service (IRS) issued a consumer alert yesterday warning taxpayers about three new tax scams that have become prevalent. These newer frauds include the Fuel Tax Credit, the Sick and Family Leave Tax Credit, and Household Employment Tax Returns.

Individuals are using these taxation positions to fraudulently increase the refunds on their personal returns. 1040’s including these items that have been deemed excessive are being red-flagged, and the refunds are being held up indefinitely during a request for additional items to substantiate the positions.

If it’s determined that the taxpayer filed an improper claim, they’ll face penalties of up to $5K per return, follow-up audits, and potentially criminal prosecution if the auditor determines any criminal intent.

The tax credits involved in these scams are limited to highly specialized situations where most don’t qualify. The scams include…

1 – Fuel Tax Credit

This is designed for Off-Highway Businesses and Farming Use only. It requires a business use such as running a farm or purchasing aviation fuel for a legitimately deductible business purpose.

2 – Sick and Family Leave Credit

This is a Covid Period credit that was available to self-employed individuals only during 2020 and 2021. Taxpayers cannot use the credit now and certainly can’t claim it as a W-2 Employee.

3 – Household Employment Taxes

This scam involves requesting a refund for household employee payroll tax payments, when the employees don’t exist and the payroll taxes were never paid.

Let me leave you with this…

If you took the bad advice of a shady tax preparer and claimed one of these bad positions, then the person they’ll be coming after first will be you. Trying to blame these fraudulent positions on a neighborhood magician won’t get you far with the Service.

Ignorance of the law has never been an acceptable defense.

I’m also finding more people in these situations because they make the mistake of trying to do their own returns. They Google a question, read a code section from the IRS Website, and think they’re doing something completely inside the law.

But there’s only one problem. Like any profession, we have our own specialized language that no uneducated individual without decades of experience will ever understand. How the IRS Statues read in plain English is rarely their actual meaning.

At that point these people do their own returns believing they’ve done sufficient research for the positions, send in a return, and the IRS initiates an audit. The taxpayers then walk into my office a couple of months later wondering why the Service wants to put them in jail.

Sometimes they’ll even pull out the IRS Code Sections and begin arguing tax law with me. Please take a step back and imagine this abject stupidity.

Dick and Jane down the street who wouldn’t know a debit from a credit if they were lucky want to argue tax law with me. Can you imagine? Most of the time I don’t even schedule these meetings because I know where they’re headed.

If you find yourself either knowingly or unknowingly in these fraudulent tax positions, there’s only one thing to do. Seek the help of a knowledgeable professional and amend your returns today.

Being proactive in this bad situation is the only way to head the IRS off at the pass. If you have questions, please give me a call.

We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,

Sincerely yours,

Chris Amundson


Accounting Solutions Ltd.



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