Consumer Alert on False Tax Credits

The Internal Revenue Service (IRS) has issued a consumer alert regarding false information circulating on social media about non-existent Self Employment, Fuel, and Family Leave tax credits. This misinformation is misleading taxpayers into filing false claims.

Promoters and social media platforms are advertising a so-called “Self Employment Tax Credit” as a way for self-employed individuals and gig workers to receive substantial payments for the COVID-19 pandemic period. Similar to previous misleading marketing around the Employee Retention Credit, incorrect information is suggesting that many people qualify for this tax credit and can receive payments of up to $32,000, which is not the case.

In reality, the underlying credit being referred to in social media isn’t called the “Self Employment Tax Credit,” it’s a much more limited and technical credit called Credits for Sick Leave and Family Leave. Many people simply do not qualify for this credit, and the IRS is closely reviewing claims coming in under this provision so people filing claims do so at their own risk.

People who were self-employed can claim Credits for Sick and Family Leave only for limited COVID-19 related circumstances in 2020 and 2021; the credit is not available for 2023 tax returns. To qualify for the Sick and Family Leave Credits, self-employed workers have to meet a variety of technical reasons in 2020 and 2021 that didn’t allow them to work, including caring for an individual subject to a quarantine or isolation order. The IRS has a detailed set of FAQs describing the very technical requirements for meeting this provision of the law.

Additionally, the IRS warns taxpayers not to be deceived by scams related to the Fuel Tax Credit and household employment taxes. Thousands of dubious claims have been submitted where taxpayers appear to be claiming credits for which they are not eligible, resulting in delayed refunds and the need for taxpayers to provide legitimate documentation to support their claims.

These scams highlight the importance of relying on the advice of a trusted tax professional rather than questionable sources on social media. Reach out to Haefele Flanagan if you have any questions about eligible tax credits.

Source: IRS.gov