IRS Warns of Scams Spreading on Social Media That Could Get ‘Well-Meaning Taxpayers in Trouble’

The Internal Revenue Service building is seen in Washington, on Sept. 28, 2020. Erin Scott/Reuters

The Internal Revenue Service (IRS) has issued a warning that inaccurate or misleading tax information is circulating on social media that lures otherwise honest taxpayers into “compromising tax situations” which can lead to legal problems.

As part of its “Dirty Dozen” series of warnings for taxpayers during tax-filing season, the IRS stated in a press release that the agency has seen several examples of bad tax advice spreading among social media users.

Sometimes these these are fraudulent tactics promoted by scammers or false tax-related schemes, but the focus involves people using legitimate tax forms for wrong reasons.

“Social media can connect people and information from all over the world. Unfortunately, sometimes people provide bad advice that can lure good taxpayers into trouble,” the IRS said.

Some of the inaccurate or misleading tax information involves common documents like Form W-2, while other bad advice that could land taxpayers in hot water relates to more obscure documents, like Form 8944.

“People should remember that there is no secret way to fill out a form and simply get a larger refund that they aren’t entitled to,” IRS commissioner Danny Werfel said in a statement. “Remember, if it sounds too good to be true, it probably is.”

Form 8944 Fraud

One recent example of bad tax advice spreading on social networks involves Form 8944, Preparer e-file Hardship Waiver Request, the IRS said.

The IRS said it has found “wildly inaccurate” suggestions being made on social media that Form 8944 can be used to receive a tax refund, even if the taxpayer has a balance due.

While the form itself is legitimate, it is meant for a targeted group of tax-return preparers who are requesting a waiver so they can file tax returns on paper instead of electronically.

“It is not in any way a form the average taxpayer can use to avoid tax bills,” the IRS said.

The tax agency cautioned that taxpayers who knowingly file forms with false or fraudulent information can face serious consequences, including potentially civil and criminal penalties. This could include fines, interest, and even imprisonment.

The IRS could also impose fraud or accuracy-related penalties, which could be as much as 75 percent of the underpayment of tax that results from the fraud.

Taxpayers could also find themselves the subject of a criminal probe by the IRS, which could result in criminal charges.

Form W-2 Fraud

Another tax scheme found by the IRS to be circulating online involves scam artists suggesting that people include false income on Form W-2, Wage and Tax Statement.

Scammers encourage taxpayers to use tax software to manually fill out Form W-2 and make up large income and withholding figures.

“Scam artists then instruct people to file the bogus tax return electronically in hopes of getting a substantial refund,” the IRS said.

The IRS said it’s actively looking out for this scheme, and reminded taxpayers that it works with the Social Security Administration as well as payroll firms and large employers to verify information on W-2 forms.

As with the Form 8944 scam, the IRS warned taxpayers not to fall for this scam, otherwise they could face serious consequences, including criminal charges for filing fraudulent tax returns.

The IRS issued the warning as part of its annual “Dirty Dozen” tax scams campaign. The initiative aims to protect taxpayers, businesses, and the tax system from identity thieves and all manner of hoaxes designed to steal money and information.

The annual list of common tax scams includes phishing, Social Security number scams, ransomware, fake charities, senior fraud, COVID-19 scams, cryptocurrency scams, social media scams, impersonator phone calls, identity theft, inflated refund claims, and promoter fraud.