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Thursday December 7, 2023

Washington News

Washington Hotline

IRS Warns About Tax Advice on Social Media

On March 28, 2023, the Internal Revenue Service (IRS) published a letter as part of its "Dirty Dozen series" warning taxpayers not to trust tax advice on social media. There are multiple claims on social media that filing certain IRS forms or documents allow a taxpayer to avoid reporting his or her actual income and receive a larger refund.

"There are many ways to get good tax information, including from a trusted tax professional, tax software and IRS.gov. But people should be incredibly wary about following advice being shared on social media," stated IRS Commissioner Danny Werfel. "The IRS continues to see a lot of inaccurate information that could get well-meaning taxpayers in trouble. People should remember that there is no secret way to fill out a form and simply get a larger refund that they are not entitled to. Remember, if it sounds too good to be true, it probably is."

Each year the IRS convenes a Security Summit that includes state tax agencies and many tax preparers. The Security Summit attempts to protect taxpayers by warning them against using strategies that lead to tax fraud.
  1. Fraudulent Form Filing or False Advice — Social media can provide a vast diversity of information. However, some of the false advice will cause good taxpayers to potentially break the law. There are numerous tactics promoted by fraudsters and scammers. Many of these tax schemes will have catchy hashtags such as "#taxadvice" or "#taxtips." There are multiple strategies promoted that are not legitimate.
  2. IRS Form 8944 Fraud — IRS Form 8944, Preparer e-file Hardship Waiver Request is intended to be used by qualified tax return preparers. It enables them to request a waiver for a taxpayer so the tax return may be filed on paper rather than through an electronic method. However, fraudsters claim that anyone can use this form to avoid paying taxes. The IRS warns taxpayers that filing a form with false or fraudulent information can lead to civil or even criminal penalties.
  3. Form W-2 Fraud — Another scheme promoted widely on social media is to encourage taxpayers to manually complete IRS Form W-2, Wage and Tax Statement. The taxpayer creates a phantom employer, reports a large income and a substantial withholding amount. Next, the taxpayer files his or her return and claims a large refund. However, the IRS works directly with payroll companies, most large employers and the Social Security Administration. The IRS verifies W-2 information and is equipped to discover fraudulent forms.
The IRS warns taxpayers to be on the lookout for claims that are not likely to be true. The best way to learn how to properly fill out forms is to go to IRS.gov and search for information on the topic.

If a taxpayer discovers an abusive tax scheme, he or she should use IRS Form 14242-Report Suspected Abusive Tax Promotions or Preparers. You can mail this to IRS Lead Development Center, Stop MS5040, 24000 Avila Road, Laguna Niguel, CA 92677-3405.

Editor's Note: An estimated 79% of millennials or Gen Z members receive financial advice through social media. The "#taxadvice" or "#taxtips" hashtags have trended widely on TikTok and Twitter. These "advisors" claim to offer high-quality guidance from CPAs and other tax preparers. Taxpayers should be careful not to fall for these scams and only follow advice from trusted sources.

Published March 31, 2023
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