Social media often takes the blame for spreading misinformation, sometimes for good reason. Recently, the IRS issued a warning to both individual and business taxpayers about false claims regarding various federal tax breaks circulating on social media. These claims typically involve legitimate tax provisions for which most taxpayers don’t qualify. If you mistakenly claim these breaks, it could delay your refund, require tedious correspondence and paperwork, and even result in penalties or criminal prosecution.
Abusing Legitimate Tax Breaks
Fraudulent or inaccurate tax advice can come from many sources. Nowadays, many people trust social media “influencers,” who may not be qualified to give financial advice. According to the IRS, thousands of taxpayers submitted falsified returns during the 2023 filing season, often citing social media advice.
The IRS is particularly concerned about false claims involving:
- The Fuel Tax Credit: Generally, only off-highway (non-fuel) businesses and farms can claim this credit. To file Form 4136, Credit for Federal Tax Paid on Fuels, you need a business purpose and qualifying business activity. Social media promoters might convince you
otherwise and even sell fictitious documents, including fuel receipts. - The Sick and Family Leave Credit: Available to employers and certain self-employed taxpayers during the pandemic in 2020 and 2021, this credit was no longer effective after 2021. Yet, many ineligible individuals claimed it on 2022 and 2023 tax returns, sometimes for household workers they never had or paid.
- Clean Energy Tax Credits: The IRS has received returns improperly claiming clean energy credits available through the Inflation Reduction Act (IRA). These returns might claim credits that offset income tax from wages, Social Security, and retirement account withdrawals. One scam involves purchasing federal income tax credits from investments in clean energy under the IRA provisions. Ensure eligibility before claiming such credits.
Trust and Verify
To avoid serious tax mistakes, arm yourself with accurate information from us and the IRS. Work with qualified and experienced tax professionals when preparing tax returns and making strategic plans to reduce your tax burden.
Additionally, be cautious when using social media. If you receive an unsolicited friend request (even from someone who shares a real-life friend), investigate thoroughly before accepting. Ignore suspicious messages and tax advice that seems “too good to be true.” Most social media platforms allow you to block unwanted posts and shady users.
Friends vs. Foes
Whether you’re concerned about your individual or business taxes, it pays to remain skeptical of unsolicited tax advice. Social media can be a valuable forum for communication and connection, but users must distinguish between friends and foes.
© 2024
