IRS Warns Taxpayers About False “Self Employment Tax Credit” Claims

The Internal Revenue Service (IRS) has issued a warning to taxpayers about misleading claims regarding a non-existent “Self Employment Tax Credit.” Promoters and social media platforms are spreading false information, encouraging taxpayers to file incorrect claims.

Promoters are marketing the so-called “Self Employment Tax Credit” as a way for self-employed individuals and gig workers to receive significant payments related to the COVID-19 pandemic. This misinformation is similar to the misleading promotion of employee retention credit. Some promoters falsely suggest that people can receive payments up to $32,000, even though this is not accurate.

The IRS clarifies that the credit being misrepresented is actually the Credits for Sick Leave and Family Leave. This credit is limited and technical, and many people do not qualify. The IRS is closely scrutinizing claims filed under this provision. People submitting false claims are doing so at their own risk.

“This is another misleading social media claim that’s fooling well-meaning taxpayers into thinking they’re due a big payday,” said IRS Commissioner Danny Werfel. “People shouldn’t be misled by outlandish claims they see on social media. Before paying someone to file these claims, taxpayers should consult with a trusted tax professional to see if they meet the very limited eligibility scenarios.”

Self-employed individuals can claim Credits for Sick and Family Leave only under specific COVID-19-related conditions in 2020 and 2021. The credit is not available for 2023 tax returns. The IRS has noted that many taxpayers are incorrectly using Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to claim a credit based on employee income instead of self-employment income.

To qualify for these credits, self-employed workers must meet specific conditions from 2020 and 2021 that prevented them from working. These include caring for someone under quarantine or isolation. The IRS provides detailed FAQs explaining the requirements for this provision.

The IRS sees similarities between the misleading promotion of the “Self Employment Tax Credit” and the aggressive marketing of the Employee Retention Credit. Both are technical credits misrepresented as easy ways for taxpayers to receive large government payments. In reality, these credits have strict and complex requirements.

The IRS urges taxpayers to consult a trusted tax professional before filing for any questionable tax credit claims circulating on social media. The IRS has previously warned about the misuse of Sick and Family Leave Credits due to various tax scams and inaccurate social media advice. These scams led many taxpayers to file inflated refund claims during the last tax season.

In addition to the Sick and Family Leave Credit, the IRS warns taxpayers to be cautious of scams involving the Fuel Tax Credit and household employment taxes. Many dubious claims have been filed, causing delays in refunds and requiring taxpayers to provide documentation to support their claims.

The IRS continues to urge taxpayers to avoid these scams. Myths about obtaining large refunds through these methods persist, but they are false. Many of these scams, including the fuel tax credit scam and bad social media advice, were highlighted during the IRS’s annual Dirty Dozen series.

“These improper claims have been fueled by social media and people sharing bad advice,” Werfel said. “Scam artists constantly prey on people’s hopes and try to use the complexity of the tax system to convince people there are secret ways to get a big refund. All of these scams illustrate that it’s important to carefully review the tax return for accuracy before filing and rely on the advice of a trusted tax professional, not someone trying to make a quick buck or a questionable source on social media.”

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