NEW FILING SEASON SCAMS INVOLVING FORM W-2 WAGES:

A consumer alert has been issued by the IRS to warn taxpayers of new scams that urge people to use wage information on a tax return to claim false credits in hopes of getting a big refund.

One scheme, which is circulating on social media, encourages people to use tax software to manually fill out Form W-2, Wage and Tax Statement, and include false income information. In this W-2 scheme, scam artists suggest people make up large income and withholding figures as well as the employer it is coming from. Scam artists then instruct people to file the bogus tax return electronically in hopes of getting a substantial refund – sometimes as much as five figures – due to the large amount of withholding.

The IRS and state tax officials compare the various W-2 data they get from employers with what taxpayers enter on their annual returns. When the fake W-2 information does not match the real numbers supplied by employers, taxpayers could face charges for filing false tax returns.

“We are seeing signs this scam is increasing, and we worry that innocent taxpayers could be at risk of being tempted into falling into a trap that puts them at risk of financial and criminal penalties,” said Acting IRS Commissioner Doug O’Donnell. “The IRS and Security Summit partners remind people there is no secret way to get free money or a big refund. People should not make up income and try to submit a fraudulent tax return in hopes of getting a huge refund.”

Two variations of this scheme are also being seen by the IRS; both involve misusing Form W-2 wage information in hopes of generating a larger refund:

• One variation involves people using Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to claim a credit based on income earned as an employee and not as a self-employed individual. These credits were available for self-employed individuals for 2020 and 2021 during the pandemic; they are not available for 2022 tax returns.
• A similar variation involves people making up fictional employees employed in their household and using Schedule H, Household Employment Taxes, to try claiming a refund based on false sick and family wages they never paid. The form is designed to report household employment taxes if a taxpayer hired someone to do household work and those wages were subject to Social Security, Medicare or FUTA taxes, or if the employer withheld federal income tax from those wages.

The IRS reminds people who try this that they face a wide range of penalties. This may include a frivolous return penalty of $5,000. Filers also run the risk of criminal prosecution for filing a false tax return.

If your client is the victim of this or any other tax scams, or are targeted by con artists, let the IRS know. You can report fraudulent misuse of the IRS name, logo, forms, or other IRS property by calling the Treasury Inspector General for Tax Administration (TIGTA) toll-free hotline at (800) 366-4484, or by going to the TIGTA website.