Have you seen some too good to be true ads online or on social media, promising huge tax breaks or massive refunds simply because you missed work due to COVID-19? If so, you may be a target for a social media tax scheme. Social media schemes are often advertised as ways to legally reduce your taxes.

Reducing your tax liability may be tempting; however, many social media schemes are illegal and can lead to serious consequences.

What is a Social Media Scheme?

Inaccurate or misleading tax information is easy to circulate on social media, and the IRS has recently seen several examples of how bad actors are targeting taxpayers via social media channels. Fraudulent form filing and bad advice on social media are part of the 2023 IRS annual Dirty Dozen campaign – a list of 12 scams and schemes involving topics such as offering help creating online accounts, donating to fake charities, and claiming refunds and credits such as the Employee Retention Credit, that put taxpayers and the tax professional community at risk of losing money, personal information, data, and more.

Common types of social media schemes involve:

• Inaccurate or misleading tax advice; and
• Requesting taxpayers to send personal information to unverified sources on social media.

These sources may claim to be tax professionals, but they are not qualified to give tax advice. Unqualified tax return preparers may not follow ethical standards and may engage in fraudulent activities.

How to Avoid a Social Media Scheme?

The Taxpayer Advocate Service (TAS) urges you to do your due diligence when choosing a tax return preparer.

“Well-meaning taxpayers are often ill-equipped to navigate our complicated tax laws, so they put their trust in return preparers,” said National Taxpayer Advocate Erin M. Collins. “Unfortunately, some unscrupulous actors take advantage of taxpayers who are trying their best to meet their tax filing and payment obligations.  It can happen to anyone. It’s important for taxpayers to know they are ultimately responsible for the accuracy of their tax returns and to be aware of scams that could land them in trouble.”

To help avoid falling prey to social media schemes, look for a preparer who has a valid Preparer Tax Identification Number and is authorized to practice before the IRS. You can also check their credentials, experience, and any reviews or complaints before hiring them. For more tips on how to select a trusted tax professional visit our Get Help page, Choosing a Tax Return Preparer.

TAS urges you to be wary of any scheme that promises to reduce your taxes significantly. Before claiming a credit or deduction that you aren’t sure you are entitled to, be sure to do your research and seek advice from a qualified tax professional. Remember, if something seems too good to be true, it probably is. If you are unsure about the legality of a particular credit or deduction, contact the IRS or a qualified tax professional for guidance.  You can also get good tax information from tax return software and IRS.gov.

By staying informed and vigilant you can protect yourself from the dangers of fraudulent credits or deductions and ensure your financial stability for years to come.

What If I Improperly Claimed a Credit or Deduction?

If a return was filed for you that improperly claims credits or deductions, you will need to file an amended return that removes the incorrectly claimed item(s). This is also true if you improperly claimed credits or deductions on last year’s return but the IRS still issued the full refund, as the IRS generally has three years to audit a return. Note, however, that the IRS has an unlimited amount of time to audit your return if the return is fraudulent, even if the preparer, not you, had the fraudulent intent to evade tax.

You are responsible for everything on your tax return, even when someone else prepares it. Correcting your return before being contacted by the IRS may help avoid some types of penalties.

If you have already been contacted by the IRS because of questions about your return, you will either need to justify your eligibility for everything claimed on your return or file an amended return. You may have a very short period of time to act.

If you claimed ineligible credits or deductions based on fraudulent advice, you should file Form 3949-A, Information Referral. If you were unaware that fraudulent credits or deductions were claimed on your return or your refund was diverted to an account under the preparer’s control without your knowledge, you should file Forms 14157, Return Preparer Complaint/14157-A, Tax Return Preparer Fraud or Misconduct Affidavit, to report the preparer. In addition to filing Forms 14157/14157-A, you will need to file an accurate original return and include the required supporting documentation listed in the Instructions for Form 14157-A.

Need More Help?

TAS may be able to help, for example if you are experiencing a financial hardship or your amended return removing improperly claimed credits is delayed in processing. TAS will advocate for you to receive all credits and deductions for which you are eligible and will work with you to correct anything incorrectly claimed.

For further reading on Social Media Schemes see:

• IRS wraps up 2023 Dirty Dozen list; reminds taxpayers and tax pros to be wary of scams and schemes, even after tax season 
• Dirty Dozen: Taking tax advice on social media can be bad news for taxpayers; schemes circulating involving tax forms
• Dirty Dozen: IRS warns individuals to stay clear of shady tax preparers; offers tips on carefully choosing tax professionals 
• Dirty Dozen: Watch out for third-party promoters of false fuel tax credit claims
• IRS opens 2023 Dirty Dozen with warning about Employee Retention Credit claims; increased scrutiny follows aggressive promoters making offers too good to be true 
• IRS issues renewed warning on Employee Retention Credit claims; false claims generate compliance risk for people and businesses claiming credit improperly 
• Abusive Tax Schemes and Abusive Tax Return Preparers 
• Choosing a Tax Return Preparer – Taxpayer Advocate Service