Bad Tax Advice from social media can lead to frozen refunds
Don’t get your tax advice from social media. The IRS had to issue a consumer alert addressing concerns about a series of tax scams and inaccurate social media advice. The scams were centered around the Fuel Tax Credit, the Sick and Family Leave Credit, and household employment taxes. The Fuel Tax Credit is designed for off-highway business and farming use. Taxpayers who want to use this credit need a business purpose and have a qualifying business activity. Credits for sick and family leave are for self-employed individuals for 2020 and 2021 during the pandemic, they are not available for the latest tax returns. This credit has been used incorrectly by taxpayers with them filing for the credit on income earned as an employee, not as a self-employed individual. The household employment taxes are when taxpayers invent fictional household employees and then file a Schedule H (Form 1040) to claim a refund based on false sick and family medical leave wages they never actually paid. This is improper as this credit is not designed for this. Myths are going around social media telling people these credits can be used to collect a bigger tax refund. This is not true as this can lead to some of these taxpayers having to pay huge financial penalties, potential audits, or even criminal action for making these improper claims. You can face up to a $5,000 fine per return for filing a frivolous claim, or worse criminal prosecution depending on the nature of the improper claim. People who fall for these traps need to follow steps to verify their actual eligibility for the credits. Because of the questionable nature of these claims, the IRS has frozen the refunds for these taxpayers till they receive more information from the taxpayer about their eligibility. Before following any advice from social media regarding your taxes, it is best to review the guidelines and then talk to a trusted tax preparer. For more information, please contact the professionals at The Center for Financial, Legal, & Tax Planning Inc., at (618) 997-3436.
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