Beware of Bad Tax Advice on social media, Protect Yourself from Costly Scams
As tax season approaches, the allure of quick and easy tax solutions promoted on social media can tempt unsuspecting taxpayers. Unfortunately, much of the tax advice circulating online is misleading, inaccurate, and can lead to serious financial and legal consequences. The IRS and the Security Summit partners have issued a strong warning about the growing threat of bad tax advice on social media, which has been known to encourage fraudulent filings and inflated refund claims.
This article highlights the risks of following unverified tax advice on social media, the most common scams to watch out for, and steps to protect yourself.
Why Social Media Tax Scams Are on the Rise
The popularity of social media platforms has given rise to influencers and self-proclaimed tax experts who share tax “hacks” that often lack legitimacy. Some are motivated by criminal intent, while others seek clout, clicks, or profit. These posts can spread rapidly, luring individuals into filing inaccurate returns in pursuit of inflated refunds.
IRS Commissioner Danny Werfel advises caution: “Finding a trusted tax professional or visiting IRS.gov is a better way to research a tax issue than relying on someone talking in their car or their kitchen about a non-existent tax hack.”
Common Tax Scams Circulating on Social Media
The “Self-Employment Tax Credit”
Scammers falsely claim that self-employed individuals and gig workers can receive up to $32,000 by using Form 7202, which was previously available for limited COVID-19-related sick and family leave credits in 2020 and 2021. These credits are no longer valid for 2023 or 2024, yet misleading posts continue to promote their use.
Fake Household Employment Taxes
Promoters advise taxpayers to fabricate household employees and file Schedule H (Form 1040) to claim sick and family leave wages for workers that don’t exist. This scheme not only violates tax laws but can also trigger audits and penalties.
Improper Use of the Fuel Tax Credit
The Fuel Tax Credit is specifically for off-highway business and agricultural use, such as for farms or aviation gasoline. Social media posts often encourage individuals without qualifying business activities to claim the credit, misleading taxpayers into filing fraudulent returns.
Inflated Income and Withholding
This scam involves creating false Form W-2s with fabricated income and tax withholding amounts. Scammers promise substantial refunds, but the IRS flags such returns, resulting in delays, audits, and potential criminal charges.
Claim of Right Deduction
Promoters misinterpret tax laws, encouraging taxpayers to deduct their entire wages as “necessary expenses for the production of income.” This claim has no basis in the tax code and can lead to serious repercussions.
Risks of Following Bad Tax Advice
Delayed Refunds
Dubious claims often result in refunds being flagged and delayed until taxpayers provide documentation to support their filings. Most individuals who fall victim to these scams cannot provide legitimate proof.
Penalties and Fines
Filing a fraudulent return can result in significant fines and penalties. In extreme cases, taxpayers may face criminal prosecution and imprisonment.
Audits
Tax returns that include suspicious claims are more likely to trigger audits, which can be time-consuming, stressful, and financially burdensome.
Identity Theft Risks
Sharing personal or financial information with scammers can lead to identity theft and additional financial losses.
How to Spot and Avoid Tax Scams on Social Media
Be Skeptical of Outlandish Claims
If a tax strategy sounds too good to be true, it probably is. Claims promising easy money or massive refunds without proper documentation should raise red flags.
Verify the Source
Rely on trusted and official sources for tax advice, such as IRS.gov or professional tax advisors. Avoid taking advice from unverified influencers or individuals with no credentials.
Understand the Forms and Credits
Learn about the specific use of tax forms and credits. For example:
- Form 7202 is no longer valid for 2023 or 2024 returns.
- The Fuel Tax Credit applies only to certain businesses, not individuals.
- Wage deductions, such as the Claim of Right, have no legal basis for most taxpayers.
- Consult a Tax Professional
When in doubt, seek advice from a qualified tax professional who can provide accurate information tailored to your situation.
Steps to Take If You’ve Been Targeted by a Scam
Verify Your Filing
Check whether the claims you made on your tax return are legitimate. Use IRS resources or consult a tax professional for clarification.
File an Amended Return
If you’ve included incorrect or fraudulent claims, file an amended return to correct the errors. This can help mitigate penalties and fines.
Monitor Your Financial Accounts
If you’ve shared personal information with a scammer, watch for signs of identity theft and report suspicious activity immediately.
Stay Vigilant This Tax Season
With the 2025 tax filing season approaching, scammers are likely to intensify their efforts to deceive taxpayers. Protect yourself by relying on trusted sources for tax advice and avoiding shady or unverified claims. Remember, bad tax advice can lead to severe consequences, including audits, penalties, and legal trouble.
For accurate and reliable tax guidance, contact Gulla CPA. Our experts are here to help you navigate the complexities of tax season and ensure compliance with all applicable laws.
