A consumer alert from the Internal Revenue Service has warned taxpayers against scams that have urged filers to use false wage information to gain a large tax refund. This scam is popping up on social media and is telling people to add false information to a W-2 form.
There was over $5.7B in tax fraud in 2022 alone in the US the IRS has informed. Illicit schemes are growing fast in numbers. a bulletin released by the IRS on March 3 warned that taxpayers are being encouraged to withhold figures and invent larger incomes, make up employers, and submit returns electronically to get tax refunds in tens of thousands from the federal government.
One particular version of these scams encourages self-employed people who have claimed credits for sick or family leave through Form 7202. The scams encouraged such filers to claim credit linked to income earned as salaried people, not as someone self-employed. Such credits are no longer available though they were active during the 2020 and 2021 tax returns and were meant to support individuals and families affected by COVID-19.
A second variant tries to trick people to make up household workers and use that to claim refunds based on family wages they never paid out and sick leave through a Form 1040 (Schedule H).
The IRS warned that submitting false papers in tax returns will immediately lead to a $5,000 fine, which is considered a frivolous tax return penalty. And it could also invite criminal prosecution.
An IRS official warned that people would make a mistake by making up incomes and going for fraudulent income tax returns to just get a bigger tax refund. But the official warned that there was no secret road to a huge tax refund and any fraudulent attempt will attract criminal charges.
Various Scamming Methods That Could Target Your Tax Refund
Tax refund scams are turning out to be the most common way that scammers are employing to persuade you to part with your hard-earned money and even your identity, which can be potentially more dangerous than losing a few hundred dollars.
Criminals are preying on the stress associated with paying your income tax or interacting with an officer of the Internal Revenue Service. They are using this opportunity to steal sensitive data and also file fraudulent income tax returns. And the problem is getting worse with each passing tax year.
2022 was a high point, or low point, depending on the way you see it, in tax fraud. The agency identified close to six billion dollars in tax fraud in the 2022 financial year. And the situation threatens to be quite as depressing in 2023 with tax refund scams in plenty.
Tax refunds are on the way to becoming one of the most common ways in which conmen are persuading you to part ways with your hard-earned money or using your identity to perpetuate more online scams.
Few of us have the expertise to detect attempts to scam us. so then how do we detect a potential scam or identify an IRS imposter? There are numerous ways that fraudsters employ to win your confidence and persuade you to part with your many. And the perpetrators become active just as the tax season gets underway.
Some Basic Tax Refund Scams You Need To Watch Out For
These financial frauds are a dime a dozen in the tax filing season as criminals impersonate IRS officers and various government representatives to try to trick you into parting personal information or give them access to your tax refund details.
These scams can be lucrative for scammers as few of us are experienced enough to deal with scammers or IRS officials and are often revealed when anyone impersonating an IRS officer attempts to contact you. A substantial percentage of Americans are persuaded to part with personal information that gives them ready access to their income tax refund.
Such scams are lucrative for scammers as it opens the door for a multitude of scams as they have ready access to a huge amount of data. It can lead to even identity theft.
Such scammers can even pick up your tax refund checks or sell you personal information on the Dark-Web that could lead to identity-related thefts. If you suspect that scammers could have stolen, you need to protect your bank account, email, and other places that could be vulnerable to attack and take additional protective measures.
Every one of your personal information is vulnerable and any information you give, including your credit card number, your Social Security number, and your bank account details, all go straight to the scammers. You could end up with malware on your device that will steal information or let scammers hack your mail without your knowledge.
These scammers recommend various methods by which you can increase your tax refund amount. This includes putting down a wage amount that is low enough to trigger your eligibility for the Earned Income Credit payment.
Fraudsters also encourage filers to go online for legitimate identification numbers of employers to push through false W-2s, say tax experts. The IRS has revealed that it was in partnership with agencies such as the Security Summit as well as the Social Security Administration to check W-2 forms.
The Security Summit comprises the state tax agencies of forty-two states, the IRS, and the extended tax community that include software developers, tax preparation firms, tax and payroll financial processors, financial organizations, and tax professionals.
But there continues to be a gap between the time fraudulent tax refunds get issued and the time the IRS detects the fake W-2s. The document matching process that takes place across multiple agencies and departments takes up a while.
Thus, the time factor remains the biggest hurdle in detecting fraud and moving in on it. By the time the W-2 information is submitted and matched with the personal tax return and data submitted by employers is sent to the Social Security Administration and not the agency. So by the time this cross-agency matching occurs, several months would have passed.
The IRS has advised that if anyone has even participated in any activity that could be construed as forged, they should immediately go for an amendment of their income tax returns.
