IRS Warns: For Self-Employment Tax Credits, Skip Social Media and Consult a Pro!

Hey there, tax professionals, we are here with another crucial update! You might have seen some buzz on social media about a so-called “Self-Employment Tax Credit” promising hefty payouts. Well, hold onto your calculators because the IRS just dropped a major truth bomb that might make you rethink that quick-fix tax advice you’ve been seeing online. 

What’s the Hype and What’s the Reality?

According to a report, there's been a spike in claims. The IRS is cracking down on what can only be described as the latest tax scam that’s buzzing through social media like wildfire. This so-called “Self-Employment Tax Credit” is making waves, with some shady promoters claiming you can snag up to $32,000 if you’re a self-employed worker or gig economy hustler.  Sounds like a jackpot, right? But here’s the reality check—the IRS just threw cold water on this fiery claim.  

Let’s set the record straight. The IRS has dubbed these claims as bogus and said this so-called credit is a myth. What’s being marketed is a twisted version of a real, but highly limited, tax credit. Officially known as the Credits for Sick Leave and Family Leave, this credit was available only for specific COVID-19-related circumstances back in 2020 and 2021. Yep, you read that right—this credit is not up for grabs for your 2023 tax returns.  

Social Media Shenanigans

Why are these fake claims popping up now? Think of it as the tax world’s version of a bad sequel. Just like the Employee Retention Credit saga, which saw an avalanche of sketchy claims, this new scam is riding on the coattails of past misinformation. Promoters are out there painting a picture of easy money, but in reality, they're setting up taxpayers for a fall.  

IRS Commissioner Danny Werfel didn’t mince words. “This is another misleading social media claim that’s fooling well-meaning taxpayers into thinking they’re due a big payday,” he said. “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.”  

What’s at Stake?

So, what’s the big deal if taxpayer bite on this bait? As you all know, filing a false claim based on this “credit” could mean taxpayers are walking into a tax nightmare. The IRS is already on high alert, reviewing these claims with a fine-toothed comb. If taxpayers are caught trying to game the system, they might end up with more than just a denied credit—they could face penalties and interest on any refunds due.  

The Reality of Sick and Family Leave Credits

Here’s a quick rundown. The real Credits for Sick Leave and Family Leave were part of the CARES Act and extended relief measures. These credits applied only in specific situations during 2020 and 2021—like if you were unable to work due to quarantine or caring for someone affected by COVID-19. As we all know, they do not apply to 2023 tax filings.  

Self-employment Tax Credits: What It Covers?

Self-employed individuals can benefit from several deductions related to self-employment tax, such as deducting half of their self-employment tax from their adjusted gross income. They may also qualify for the Earned Income Tax Credit (EITC) if they have low to moderate income. The Health Coverage Tax Credit (HCTC) is available to those meeting certain criteria, covering a portion of health insurance premiums. Additional deductions include the Qualified Business Income (QBI) Deduction, Home Office Deduction, Health Insurance Deduction, and business-related expenses like supplies, advertising, utilities, rent, and vehicle expenses. Contributions to retirement plans like SEP IRAs, SIMPLE IRAs, or solo 401(k)s can earn the Saver’s Credit. To make the most of these retirement savings options, check out our detailed courses on SEP IRAs and solo 401(k)s. 

Guard Against Tax Scams with These Vital Lessons!  

• Tax professionals should stay vigilant and remain alert to emerging tax schemes and misleading claims that circulate on social media. 
• It's crucial for tax professionals to educate clients about the risks associated with believing in promises of easy money through non-existent tax credits.   
• They should always verify the accuracy of information before advising clients on potential tax benefits or credits.   
• Tax professionals should advocate for clients to consult trusted tax professionals before acting on information sourced from social media or unfamiliar sources.   
• It's important to stress the importance of adhering to IRS regulations and eligibility criteria for tax credits to ensure compliance.   
• They should highlight the necessity of maintaining comprehensive documentation and filing accurately to mitigate the risk of penalties and audits.   
• Tax professionals should foster open communication with clients to address their concerns and clarify any misconceptions about tax laws.   
• They need to monitor IRS announcements and updates regularly to stay informed about current tax issues and regulatory changes.   

The IRS’s message is clear: don’t be duped by social media myths about non-existent tax credits. If it sounds too good to be true, it probably is. Stick to the facts, consult a trusted tax professional, and steer clear of anyone promising a big payday without solid proof. The IRS is working hard to process legitimate claims, but patience is key. And remember, always verify information with credible sources before acting on it. 

Stay tuned, stay savvy, and keep those tax returns in check!