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Wednesday, June 7, 2023
June 7, 2023

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Tax-season scams circulate on social media. Fraud can bring financial, criminal penalties


TACOMA — There’s only about a month left for tax season. Some might look upon this time of year positively, as many taxpayers receive a good chunk of money back from the state and federal governments.

But some people are trying to unethically maximize their refund.

Earlier this month, the Internal Revenue Service warned consumers about new tax-filing scams that could potentially plunge unsuspecting victims into financial or criminal trouble. The scheme could convince people into committing fraud so they can receive a larger tax refund.

On social media, scam artists are encouraging taxpayers to use software to automatically fill out W-2 tax statements and include false income information. They say to write large figures for their financial income and tax withholding. Scammers say filing this way could yield as much as a five-figure refund.

“The IRS and Security Summit partners remind people there is no secret way to get free money or a big refund,” stated acting IRS Commissioner Doug O’Donnell in the announcement. “People should not make up income and try to submit a fraudulent tax return in hopes of getting a huge refund.”

The Security Summit is composed of the IRS, state tax agencies, tax-preparation firms and other tax professional organizations. Its primary mission is to detect and combat fraudulent tax returns and refunds. The summit is partnered with 42 states, but Washington is not one of them.

Trending fraudulent schemes

The IRS brought attention to two schemes:

  • Claiming credit based on income earned as an employee and not a self-employed individual on the Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. The credits were available for the 2020 and 2021 tax returns due to the global pandemic. They’re not available for 2022 returns.
  • Making up fake employees in one’s household on the Schedule H (Form 1040) Household Employment Taxes to get a refund for false sick and family wages.

Penalties for false tax info

Filing false tax returns is a felony, and those who commit it can incur significant fines or jail time.

There are a wide range of penalties for committing tax-related crimes. For instance, one might have to pay a frivolous return penalty of up to $5,000. But in more severe cases, a person who files false tax information may be fined up to $100,000 and be sentenced up to three years in prison.

In 2022, The News Tribune reported on a Gig Harbor man who committed tax fraud from 2007 to 2017. He was sentenced to six months in prison. A different person from Tacoma pleaded guilty to tax fraud in 2021 and agreed to pay nearly $40,000 in restitution.