The Internal Revenue Service (IRS) is alerting taxpayers of a new scam prompting them to purchase clean energy tax credits.
The target: taxpayers who have filed a Form 1040, which is typically used to determine how much is owed by the individual or if they are due a tax refund. In a statement, the agency identified the scammers as “unscrupulous tax return preparers” who are misleading individuals on the rules surrounding clean energy credits.
“This is another example where scammers are trying to use the complexity of the tax law to entice people into claiming credits they’re not entitled to,” Commissioner Danny Werfel said. “Taxpayers should be wary of promoters pushing dubious credits like this and others. The IRS is watching out for this scam, and we urge people to use a reputable tax professional before claiming complex credits like clean energy.”
Individuals who claim such credits improperly run the risk of potentially being responsible for repaying the inflated credit with added interest and possible penalties. The IRS said the tax credits are only available for purchase to offset income tax from what they call “passive activity” with things like rental property or some limited partnerships.
According to the agency, the average taxpayer does not fall into that category of passive income tax liability. If taxpayers are offered these credits, they are advised to contact a tax professional.
Some cons that may be recognizable by taxpayers are phishing and smishing scams, a practice that pushes unsolicited emails or text messages of scammers posing as the IRS with the goal of grabbing personal information. Social media scams and people placing intimidating phone calls are also popular amongst scammers.
The clean energy credit scam is just the latest in a lengthy list of similar scams that involved the Fuel Tax Credit, the Sick and Family Leave Credit, and household employment taxes. In May 2024, Forbes released a list of this year’s 12 most common tax scams.
Other scam trends include improper use of trust, where individuals advise taxpayers to transfer assets into trusts, including charitable remainder annuity trusts, and claim the move will limit taxable income or increase deductions.
Abusive Tax Shelters scams typically attempt to take a deep dive into “tax strategies” that falsely promise tax benefits. Another is baseless tax arguments that urge taxpayers to provide pointless claims in order to avoid taxes.
The agency urges taxpayers to protect themselves by confirming information with the IRS on its website.
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