IRS Red Flags New Tax Season W-2 Scam – Don’t be a Victim!

The Internal Revenue Service is warning taxpayers about an emerging scam involving Form W-2. Fraudsters are asking people to use wage information on their tax returns to claim false credits to receive larger refunds than they are entitled to. Protect yourself from becoming a victim by being aware of this new threat.

In the National Consumer Protection Week that started on 6th March 2023, IRS and its Security Summit partners are working towards spreading awareness about all the scams and security risks that taxpayers need to be mindful of.

Scammers have been promoting the idea on social media that taxpayers can use tax software to fill out a W-2 form with fabricated income and withholding information. They allege that this will result in an enormous refund, sometimes up to five figures, when filing the fraudulent return electronically. Taxpayers should know this new threat and not fall for such false claims.

There are two variations of W-2 scams going around.

• One variation of the W-2 scam involves individuals attempting to fraudulently claim a credit from Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. This credit was available in 2020 and 2021 as part of pandemic relief measures but is not applicable for 2022 tax returns. However, scammers may misrepresent their income as earned from employment instead of self-employment to claim the credit. This is illegal, and taxpayers need to be aware of this scam. 

• People may also attempt to falsely claim a refund by fabricating employees in their household and using Schedule H, Household Employment Taxes. This form is intended for taxpayers who hired someone to do domestic work and paid Social Security, Medicare or FUTA taxes on their wages or withheld federal income tax from them. Such an act is illegal and punishable by law.

Anyone caught falsifying information on their tax return may face civil prosecution by the IRS. This can result in hefty fines and a frivolous return penalty of $5,000. The penalty can be even more severe for those convicted of fraudulently filing a return and claiming an undeserved refund.

Being mindful of the time-sensitive nature of filing taxes, taxpayers must ensure accuracy when preparing their returns. It’s important to double-check all information and have a professional review the return before filing it. Errors can delay refunds or even lead to an audit. So, don’t let these mistakes cost you time and money. Take the necessary steps to ensure accuracy when filing taxes.