The IRS announcement explained that promoters on social media were marketing the so-called Self-Employment Tax Credit as a way for self-employed individuals and gig workers to receive substantial payments for the COVID-19 pandemic period.
This misinformation parallels misleading marketing efforts previously seen with the Employee Retention Credit, the IRS said. Many are falsely led to believe they can qualify for tax credits and payments up to $32,000 when, in fact, they do not.
Contrary to these claims, the credit referred to on social media is not a Self-Employment Tax Credit; rather, it is a much more limited and technical credit known as the Credits for Sick Leave and Family Leave, which not many individuals are eligible for, according to the agency.
The IRS added taxpayers were filing at their own risk when following the advice of social media and that claims filed under this provision would be subject to scrutiny.
“This is another misleading social media claim that’s fooling well-meaning taxpayers into thinking they’re due a big payday,” IRS Commissioner Danny Werfel said in the statement. “People shouldn’t be misled by outlandish claims they see on social media. Before paying someone to file these claims, taxpayers should consult with a trusted tax professional to see if they meet the very limited eligibility scenarios.”
Self-employed individuals can only claim the Credits for Sick and Family Leave for specific COVID-19 related circumstances in 2020 and 2021 and the credit is not applicable for 2023 tax returns, per the agency statement.
The IRS said it has thus far discovered numerous instances where taxpayers incorrectly use Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to claim a credit based on income earned as an employee rather than as a self-employed individual.
To qualify for the Sick and Family Leave Credits, self-employed workers must meet various technical criteria from 2020 and 2021, including being unable to work due to caring for someone under a quarantine or isolation order.
The IRS said there are similarities between the promotion of the Self-Employment Tax Credit and the aggressive marketing of the Employee Retention Credit—both of which have stringent requirements to qualify but have been misrepresented as easy ways for average taxpayers to receive significant government payments.
The IRS advises all taxpayers to consult with a trusted tax professional before filing claims for any Self-Employment Tax Credit or other questionable tax claims promoted on social media.
Previously, the IRS warned taxpayers about the misuse of Sick and Family Leave Credits, which stemmed from various tax scams and inaccurate social media advice, leading thousands to file inflated refund claims.
In addition to the Sick and Family Leave Credit, the IRS cautions against scams involving the Fuel Tax Credit and household employment taxes, noting a surge in dubious claims resulting in delayed refunds and the need for taxpayers to provide additional documentation.
“These improper claims have been fueled by social media and people sharing bad advice,” Mr. Werfel added. “Scam artists constantly prey on people’s hopes and try to use the complexity of the tax system to convince people there are secret ways to get a big refund.”
The agency urged tax professionals to be on the lookout for a wave of scams “hitting taxpayers with frequency,” including those in which criminals use AI to gain access to Social Security numbers, birth dates, and banking information from victims, a July 9 announcement stated.
