IRS Cracks Down on Fake Tax Credit Schemes: $162M in Penalties Issued

The IRS has a new warning for taxpayers: don’t fall for false tax credit schemes spreading on social media. These scams are encouraging people to claim credits they are not eligible for, such as the Fuel Tax Credit or the Sick and Family Leave Credit.

The problem is serious. The IRS has already issued $162 million in penalties against those who made false claims. While some people may have been misled into thinking they found a “secret tax hack,” the reality is simple: making false claims can lead to large fines, audits, and even legal trouble.

In this article, we’ll break down:

What these scams look like
Which credits are being misused
The penalties the IRS is handing out
How you can stay safe and avoid falling for fraud

What Are Tax Credit Schemes?

A tax credit scheme is when someone tells you to claim money from the IRS that you don’t actually qualify for. These scams often show up as posts, videos, or even step-by-step guides on social media platforms like TikTok, Facebook, or YouTube.

The scammers usually say things like:

“The IRS doesn’t want you to know this!”
“Here’s how to get thousands of dollars back fast.”
“Claim this credit—even if you didn’t spend the money.”

At first, it might sound exciting. Who wouldn’t want more money back from their taxes? But in reality, if you claim credits you don’t qualify for, the IRS will notice. And when they do, the penalties can be very expensive.

The Fuel Tax Credit Scam

One of the most common scams is the misuse of the Fuel Tax Credit.

Here’s the truth:

The Fuel Tax Credit is only for businesses that use fuel for off-highway purposes.
This means farmers, construction companies, or certain industries that use fuel in special ways.
Everyday taxpayers who buy gas for their cars do not qualify.

Scammers on social media have been telling people to “just claim the Fuel Tax Credit on your return” even if they don’t run a business that qualifies. This is a direct violation of IRS rules.

If you file a return with this false claim, the IRS can deny the credit and charge you heavy penalties.

The Sick and Family Leave Credit Scam

Another common scheme is tied to the Sick and Family Leave Credit.

This credit was created during the pandemic to help businesses provide paid leave for workers who got sick with COVID-19 or needed to care for family.

The problem is that this credit expired in 2021. It is no longer available to claim.

Still, social media scammers continue to promote it as a “secret tax break.” Taxpayers who follow this advice are filing false claims and putting themselves at risk for audits and fines.

The Cost of False Claims

The IRS has already caught on to these scams. In fact, they reported $162 million in penalties linked to false tax credit claims spread through social media.

That number shows just how many people have been lured into making bad choices on their tax returns.

Here’s what can happen if you make a false claim:

The IRS will deny your refund.
You may owe back taxes, plus interest.
You could face accuracy penalties (20% of the underpayment).
In severe cases, the IRS may pursue fraud charges.

The idea of “getting free money from the IRS” is simply too good to be true.

Why Social Media Makes This Worse

Scammers know how to make their posts go viral. They use catchy titles, trending sounds, and big promises to get attention.

For example, a video might say:

“This is the tax trick accountants don’t want you to know!”
“Claim $5,000 easily with this one form.”

The problem is that many people believe these posts because they look convincing. Some even share fake screenshots of large refunds to make the scam appear real.

But remember: just because it’s on social media doesn’t mean it’s true.

IRS Response to These Scams

The IRS is actively fighting back against these schemes. They’ve:

Released multiple public alerts warning taxpayers about fake credits.
Partnered with tax professionals to spread accurate information.
Audited and penalized those who filed false claims.

They are also reminding taxpayers that the best source of information is the IRS itself, not a social media post.

How to Protect Yourself

If you want to stay safe during tax season, here are some steps you can follow:

Check official IRS resources.
Visit irs.gov to see what credits are actually available.
Work with a trusted tax professional.
A CPA or enrolled agent can confirm if you qualify for a credit.
Be skeptical of viral posts.
If someone promises “free money” from the IRS, it’s almost always a scam.
Report scams.
If you see a suspicious post, you can report it directly on the platform or to the IRS.

Key Takeaways

The IRS is warning against false tax credit claims promoted on social media.
Common scams include the Fuel Tax Credit and the Sick and Family Leave Credit.
The IRS has already issued $162 million in penalties to taxpayers who filed false claims.
Always check IRS.gov or speak to a trusted tax professional before filing.

Conclusion

Tax season is stressful enough without the added risk of scams. While social media can be fun and useful, it is not a reliable source for tax advice.

The bottom line is simple: if a tax credit seems too good to be true, it probably is. Don’t let a viral video cost you thousands in penalties. Stay safe, stay informed, and always rely on trusted sources for your financial future.