The IRS in the United States has issued an urgent warning to taxpayers about a rapidly spreading scam. This scam involves the purchase of clean energy tax credits, which, although they may sound promising, can lead to severe financial consequences for those who fall for it.
The scam revolves around the clean energy tax credits offered under the Inflation Reduction Act (IRA). Some unscrupulous tax preparers are misrepresenting the rules of this law to fraudulently claim these credits.
The IRS warns: Understanding the scam
Scammers promise taxpayers significant tax savings through the purchase of these credits; however, the reality is that many of these credits are not applicable to the buyers’ tax situations.
Fraudulent preparers often target individuals filing Form 1040, suggesting they can use these credits to offset taxes on income such as wages, Social Security, and retirement account withdrawals.
However, under the IRA’s rules, clean energy credits can only be applied to passive income, and most taxpayers do not generate this type of income.
Danny Werfel, the IRS Commissioner, emphasized that these scams exploit the complexity of tax legislation to deceive people into claiming benefits they are not entitled to. Werfel stresses the importance of consulting with a certified tax professional before attempting to claim complex tax credits like those for clean energy.
Risks and consequences
Taxpayers who fall for this scam and claim inappropriate credits face not only the repayment of the credits received but also the accumulation of interest and potential penalties. The IRS has warned that it will take enforcement actions against those who file fraudulent claims.
Tips for taxpayers
If you are considering purchasing clean energy credits under the IRA, it is crucial to:
- Consult with a trusted tax professional.
- Verify your eligibility to purchase and claim these credits.
Other scams monitored by the IRS
In addition, the IRS continues to monitor other scams that entice taxpayers to make inappropriate claims on various tax credits. It is essential to remain vigilant and verify all information with reliable sources before making tax-related decisions.
If you suspect a fraudulent scheme or an inappropriately acting tax preparer, you can report it using IRS Form 14242.
You can also send this information by mail or fax to the IRS Lead Development Center in Laguna Niguel, California, or through the IRS Whistleblower Office, where you may even be eligible for monetary compensation for your report.
In summary, the key to avoiding scams related to tax credits is education and meticulous verification of information. When faced with promises of significant tax advantages, it is best to proceed with caution and always seek the guidance of reliable professionals.