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On May 14, 2024, the Internal Revenue Service (IRS) published a consumer alert. The IRS warned taxpayers that there are thousands of returns that include false claims for the Fuel Tax Credit, the Sick and Family Leave Credit and household employment taxes. These "thousands of dubious claims" may lead to audits. Taxpayers who made these claims will need to show documentation to qualify for the deductions or credits.
The IRS urges taxpayers who potentially have claimed an incorrect credit to have their return reviewed by a trusted tax preparer. IRS Commissioner Danny Werfel stated, "Scam artists and social media posts have perpetuated a number of false and misleading claims that have tricked well-meaning taxpayers into believing they are entitled to big, windfall tax refunds. These bad claims have been caught during our fraud review process. Taxpayers who filed these claims should realize they have been tricked, and they face an extensive review process and a long potential wait if they are owed a refund for other things."
The three primary errors on returns relate to the Fuel Tax Credit, the Sick and Family Leave Credit and household employment taxes.
Commissioner Werfel continued, "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. These three credits illustrate that it is important to carefully review the tax return for accuracy before filing and rely on the advice of a trusted tax professional, not some fly-by-night preparer or a questionable source they hear on social media."
Because of the level of fraud in these three areas, the IRS has frozen refunds for thousands of taxpayers. Many taxpayers receive a letter requesting a verification of their identity. Once you verify your identity through a Taxpayer Assistance Center visit, there may be additional documentation required in a second IRS letter. The letters may include IRS Notice 3176 and could subject taxpayers to a frivolous return penalty. The potential penalty is up to $5,000 for filing a frivolous return.
The IRS urges individuals who receive a letter requesting verification of identity or additional documentation to contact a qualified tax preparer. It may be appropriate to go to IRS.gov and review the "Should I file an amended return?" tool.
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