Did You Fall for a Social Media Tax Credit Scam? You May Owe the IRS

The Internal Revenue Service (IRS) recently published a news release in which it announced that thousands of taxpayers have filed “inaccurate or frivolous returns” due to falling for social media scams promoting improper use of the Fuel Tax Credit and the Sick and Family Leave Credit. In its news release, the IRS also announced that it has imposed more than $162 million in penalties in these cases. As Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains, even when taxpayers fall victim to social media scams, they are still required to pay the full amount they owe:

Falling Victim to a Social Media Scam is Not an Excuse for Tax Noncompliance

The IRS’ position on U.S. taxpayers’ liability is clear: Taxpayers must pay the full amount they owe, and they must pay what they owe on time. With only very limited exceptions, if a taxpayer underpays the IRS, the taxpayer is liable not only for the full amount of the underpayment, but for associated interest and penalties as well.

This is true even if the underpayment is due to an honest mistake, such as relying on misinformation the taxpayer found online.

In other words, falling for a social media tax credit scam is not an excuse for noncompliance. Taxpayers who fall victim to these scams can—and do—face penalties from the IRS. Additionally, since interest continues to accrue while taxpayers remain delinquent (and accrues on both taxes and penalties), taxpayers can face substantial additional liability as a result of their victimization.

But, this is not the IRS’ concern. The IRS strictly enforces taxpayer compliance, and it makes clear that relying on misinformation or bad advice does not justify filing an inaccurate or frivolous return. Accurate information is available online as well, and taxpayers have an affirmative obligation to ensure that they timely pay what they owe.

Options for Taxpayers Who Have Underpaid the IRS Due to Social Media Tax Credit Scams

Where does this leave taxpayers who have fallen for social media tax credit scams?

The answer to this question depends on whether the IRS is currently auditing a taxpayer’s returns. Taxpayers who are facing an audit will need to defend themselves effectively during the audit process in order to avoid unnecessary consequences. With the right approach, it may be possible to settle with the IRS, and taxpayers can also submit offers in compromise or negotiate installment agreements with the IRS when necessary.

For those who are not yet facing a tax audit, a proactive approach will generally be best. Taxpayers who take the necessary steps to proactively resolve their mistakes can avoid facing IRS scrutiny while also limiting the amount they owe. If you have questions about what you should do in this scenario, we recommend that you speak with a Virginia tax lawyer as soon as possible.

Request a Confidential Consultation with Virginia Tax Lawyer Kevin E. Thorn

Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, represents taxpayers who need to resolve complex issues with the IRS. To request a confidential consultation with Mr. Thorn, call 703-752-3752 or contact us online today.