MauledAgain

There is no question that all sorts of “scams and bad advice” circulate with promises of lower taxes and refundable credits for taxpayers who fall for these scams and bad advice. Though some of these misleading claims are the product of an ill-informed person thinking they are helping others, most are designed to funnel money to the perpetrator of the arrangement. According to the IRS and is Security Summit partners, these scams include the “Fuel Tax Credit” claim (misleading people who are not eligible for the credit to claim it), the “Self-Employment Tax Credit” plan (a limited credit that existed only for several years and hasn’t been available since 2022), “pig-butchering” crypto scams, and “investments in fake cryptocurrencies.” Other bad advice encourages taxpayers to invent fake household employees and claim refunds based on sick and medical leave wages never paid, to create fake W-2 forms with inflated income and withholding amounts from a fake employer and to use these for filing returns to get refunds, to claim deductions equal to the entire amount of their wages and labeling the deduction as an expense for the production of income.

There is no question why the people who deliberately market these suggestions do so. They know that a large proportion of Americans are easy prey for misinformation and lies. They know that too many Americans are unwilling to do research to verify what they hear, see, or read. They know that too many Americans let their initial emotional reaction suppress critical thinking and analysis. They know that the chances of getting caught and prosecuted are low, and that the chances of meaningful punishment if convicted are even lower.

An interesting twist to the IRS statement is its reference to “social media.” What is social media? According to Merriam-Webster, it consists of “forms of electronic communication (such as websites for social networking and microblogging) through which users create online communities to share information, ideas, personal messages, and other content (such as videos).” This definition is so broad that it includes the IRS website itself, a place where users, that is, IRS employees, create an online community through which it shares information. The IRS announcement itself explains that “a better option for taxpayers to learn how to properly use tax forms and claim credits is to go to IRS.gov and follow IRS social media channels.” So it’s not a matter of concluding that all information obtained through social media is necessarily bad. It’s a matter of learning how to separate truth from lies. More on that in a moment.

On the other hand, limiting the warning to “social media” ignores the other means by which misinformation and lies are disseminated. The misinformation and falsehood communication problem existed long before electronic communications and, for example, the internet, came into existence. People with bad intent offered bad advice and spread lies in social clubs, churches, schools, taprooms, business offices, and on public transport. What the internet had done is to provide an environment in which bad advice tossed up at a local club and that circulated among perhaps hundreds or a few thousand people to find its way to billions of people all over the planet.

What’s the answer? The IRS gave the same advice I’ve been offering for decades: “We urge people to do some research before falling for these scams. Finding a trusted tax professional or visiting IRS.gov is a better way to research a tax issue than relying on someone talking in their car or their kitchen about a non-existent tax hack.” Following advice from an online stranger, or even a well-known friend or family member that turns out to be bad advice can be costly. When taxpayers accept the misinformation or bad advice without verification, the IRS explains that “they could face audits and expensive fines [and] in some cases, they could be subject to federal criminal prosecution and imprisonment.” In other words, do deep research. Do background checks on tax return preparers. Ask the friend or relative where they are getting the information they are sharing and to direct you to its source. Their refusal or inability to do so is a red flag. If there is a source, go to it. Research it. Analyze it. Protect yourself.