The Internal Revenue Service has issued a stark warning to taxpayers about a surge in fraudulent tax advice circulating on social media, which has resulted in over 32,000 penalties totaling more than $162 million over the past five years. The schemes often involve viral videos and posts promoting fake tax credits that trick thousands of Americans into filing false returns.
The penalties represent significant financial harm to individuals and families who follow the misleading online trends. According to the IRS, the issue is growing, with scammers becoming more sophisticated in their methods of promoting illegitimate claims.
Profile of a Social Media Tax Scam
Officials have identified several red flags associated with these scams. They often feature claims that “everyone qualifies” for complex credits or promise “easy money” and fast refunds with little documentation.
Among the most frequently promoted fake credits are the Fuel Tax Credit and the Sick and Family Leave Credit, both of which are intended for specific business or employer use and do not apply to the vast majority of individual wage earners.
“These schemes are not only misleading but can cost taxpayers dearly,” stated James Clifford, IRS Director of Return Integrity and Compliance Services, in a recent communication. “People who follow this advice could end up with rejected claims and a penalty of up to $5,000 in addition to any other penalties that might apply.”
The High Cost of Unvetted Advice
The consequences for filing a frivolous return based on this advice can be severe. Immediate repercussions include refund delays or denials and a potential $5,000 civil penalty. In the long term, a taxpayer’s account may be flagged for increased scrutiny and future audits.
Tax experts are also voicing concern over the trend, noting the sophistication with which scammers exploit the public’s lack of familiarity with the tax code.
“This trend is alarming because it preys on people’s desire for a financial edge in a complex system,” commented a spokesperson from Virtue CPAs, a firm tracking tax compliance issues. “Scammers create content that looks credible, promising secret loopholes. When the IRS sends a notice, the scammers often advise the taxpayer to ignore it, digging them into a deeper hole. It underscores the critical importance of verifying tax strategies with qualified, licensed professionals.”
IRS and Experts Urge Public Caution
The IRS advises extreme caution before acting on any tax advice found online. The agency recommends the public verify any information on its official website, IRS.gov, which maintains an updated list of recognized frivolous tax arguments.
Key warning signs of a scam include:
- Claims that the IRS “doesn’t want you to know” about a credit.
- Advice to ignore official correspondence from the IRS.
- Pressure to act quickly before a supposed “loophole” closes.
For taxpayers who believe they may have already filed an erroneous return based on social media advice, the IRS recommends they seek guidance from a reputable tax professional to consider filing an amended return to correct the issue.
Need Help with Your Tax Situation?
Don’t let social media scams cost you millions in penalties. Contact Virtue CPAs today for reliable, professional tax guidance you can trust.
