IRS issues FAQs to dispute misleading social media claims

The Internal Revenue Service has stepped up its efforts to combat dubious advice that has been proliferating on social media promoting tax schemes involving the Fuel Tax Credit, the Sick and Family Leave Credit, and household employment taxes.

The IRS first warned about the tax scams back in May, but on Monday it posted a fact sheet in the form of frequently asked questions and answers to debunk the claims.

The agency noted the schemes have led to thousands of inflated refund claims during the past tax season, and the IRS has increased its compliance efforts as a result. The IRS has been sending out letters questioning the claims and holding up tax refunds as a result

“Some taxpayers may receive a Letter 5747C and/or 4883C/5071C with instructions to verify their identity and tax return information so we can continue processing their tax return,” said the IRS. “Even after this verification, questionable refunds will continue to be held until credit eligibility is verified.”

The IRS is cautioning taxpayers to beware of social media claims. “Social media can connect people and information from all over the globe,” said the fact sheet. “Unfortunately, sometimes people provide bad tax advice that can lure good taxpayers into trouble. The IRS warns taxpayers to be wary of trusting internet advice, whether it’s a fraudulent tactic promoted by scammers or a deliberately false tax-related scheme trending across popular social media platforms. The IRS is aware of various filing season hashtags and social media topics related to this fraudulent information. These generally involve people trying to use legitimate tax forms for the wrong reason.”

The scams seem to be tied to particular forms and schedules, making it easier for the IRS to spot anomalies. The agency cited some examples of frequently abused claims: 

• The Fuel Tax Credit (Form 4136);
• The Sick and Family Leave Credit for Self-Employed Individuals (Form 7202);
• Overstated withholding; and,
• Schedule H, “Household Employment Taxes including Qualified Sick Leave Wages.”

The IRS is sending taxpayers letters such as

• 3176C, “Frivolous Correspondence Response;”
• 5747C, “Potential Identity Theft during Original Processing – TAC;”
• 5071C, “Potential Identity Theft during Original Processing with Online Option;” and,
• 4883C, “Potential Identity Theft During Original Processing.”