Tax Tips: IRS warns taxpayers they may be scam victims if they filed for big refunds; misleading advice leads to false claims for Fuel Tax Credit, Sick and Family Leave Credit, Household Employment taxes
Taxpayers who filed these claims mistakenly need to follow advice on letters; consider filing amended return or talking to a trusted tax professional
WASHINGTON – The Internal Revenue Service issued a consumer alert today following ongoing concerns about a series of tax scams and inaccurate social media advice that led thousands of taxpayers to file inflated refund claims during the past tax season.
The IRS warned taxpayers not to fall for these scams centered around the Fuel Tax Credit, the Sick and Family Leave Credit and Household Employment taxes. The IRS has seen thousands of dubious claims come in where it appears taxpayers are claiming credits for which they are not eligible, leading to refunds being delayed and the need for taxpayers to show they have legitimate documentation to support these claims.
The IRS continues to urge taxpayers to avoid these scams as myths continue to persist that these are ways to obtain a huge refund. Many of these scams were highlighted during this spring’s annual Dirty Dozen series, including the Fuel Tax Credit scam, bad social media advice and “ghost preparers.”
For taxpayers who did fall for these traps, they need to follow steps to verify their eligibility for the claim. Some taxpayers could also face steep financial penalties, potential follow-up audits or criminal action for improper claims. The IRS encourages people to review the guidelines, talk to a trusted tax preparer and, in some cases, file an amended return to remove claims for which they’re ineligible to avoid potential penalties.
“Scam artists and social media posts have perpetuated a number of false and misleading claims that have tricked well-meaning taxpayers into believing they’re entitled to big, windfall tax refunds,” said IRS Commissioner Danny Werfel. “These bad claims have been caught during our fraud review process. Taxpayers who filed these claims should realize they’ve been tricked, and they face an extensive review process and a long potential wait if they’re owed a refund for other things.”
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Tax Tips: Time to claim $1 billion in tax refunds from 2020 expires May 17
WASHINGTON ― The Internal Revenue Service today reminded the 1 million people who didn’t file their tax year 2020 returns they may be eligible for a refund if they file by the May 17 deadline.
The IRS estimates more than $1 billion in refunds remain unclaimed because people haven’t filed their 2020 tax returns yet. The state-by-state table below shows how many people are potentially eligible for these refunds, and the average median refund in each state.
There's no penalty for failure to file if a refund is due. However, a return claiming a refund must be filed within three years of its due date for a refund to be allowed. After the expiration of the three-year period, the refund statute generally prevents the issuance of a refund check and the application of any credits, including overpayments of estimated taxes or withholding amounts, to other tax years that are underpaid.
For 2020 tax returns, people have a little more time than usual to file their claim for refunds. Typically, the filing deadline to claim old refunds falls around the tax deadline of April 15. However, the 2020 filing deadline was pushed to May 17, due to COVID-19, making the three-year window deadline for 2020 unfiled returns May 17, 2024. The IRS issued Notice 2023-21 on Feb. 27, 2023, providing legal guidance on claims required by the postponed deadline.
Many people who didn’t file may be eligible for more
By missing out on filing a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2020. The estimate does not include credits that non-filers may be eligible to receive. Credits include the Earned Income Tax Credit (EITC), the Recovery Rebate Credit or other credits that may be applicable.
Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2020, the EITC was worth as much as $6,660 for taxpayers with qualifying children. The EITC helps individuals and families whose incomes are below certain thresholds.
The IRS has previously reminded those who may be entitled to the COVID-era Recovery Rebate Credit in 2020 that time is running out to file a tax return and claim their money. The Recovery Rebate Credit is a refundable credit for individuals who did not receive one or more Economic Impact Payments, also known as stimulus payments, distributed in 2020 and 2021.
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Tax Tips: By law, taxpayers have the right to challenge the IRS’ position and be heard
Every taxpayer has fundamental rights when working with the IRS. Collectively their rights are known as the Taxpayer Bill of Rights. One of these is the right to challenge the IRS's position and be heard.
Here’s what this right means for taxpayers.
Taxpayers have the right to:
• Raise objections.
• Provide additional documentation in response to formal or proposed IRS actions.
• Expect the IRS to consider their timely objections.
• Have the IRS consider any supporting documentation promptly and fairly.
• Receive a response if the IRS does not agree with their position.
Here are some specific things this right provides taxpayers:
• In some cases, the IRS will notify a taxpayer that their tax return has a math or clerical error. If this happens, the taxpayer:
o Has 60 days to tell the IRS that they disagree.
o Should provide copies of any records that may help correct the error.
o May call the number listed on the letter or bill for assistance.
o Can expect the agency to make the necessary adjustment to their account and send a correction if the IRS upholds the taxpayer's position.
• Here's what will happen if the IRS does not agree with the taxpayer's position:
o The agency will issue a notice proposing a tax adjustment. This is a letter that comes in the mail.
o This notice provides the taxpayer with a right to challenge the proposed adjustment.
o The taxpayer makes this challenge by filing a petition in U.S. Tax Court. The taxpayer must generally file the petition within 90 days of the date of the notice, or 150 days if it is addressed outside the United States.
• Taxpayers can submit documentation and raise objections during an audit. If the IRS does not agree with the taxpayer's position, the agency issues a notice explaining why it is increasing the tax. Prior to paying the tax, the taxpayer has the right to petition the U.S. Tax Court and challenge the agency's decision.
• In some circumstances, the IRS must provide a taxpayer with an opportunity for a hearing before an independent Office of Appeals. The agency must do this before taking enforcement actions to collect a tax debt.
o These actions include levying the taxpayer's bank account. Immediately after filing a notice of federal tax lien in the appropriate state filing location.
o If the taxpayer disagrees with the decision of the Appeals Office, they can petition the U.S. Tax Court.
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