The IRS has recently identified a particularly nasty W-2 tax hack that encourages individuals to lie about their income in order to obtain unearned tax credits and larger tax refunds.
Tax season is accompanied by tax frauds like night follows day. Yet with so much advice circulating on the Internet, it can be difficult to distinguish between the good and the bad. Here is a discussion of this terrible idea and the legal ramifications for any taxpayer foolish enough to do it.
W-2 Tax Scheme Involves Deceiving The IRS
The IRS warns taxpayers of an attempt to manually alter W-2 forms with fictitious earnings data using a social network. Scammers advocate inventing large withholding amounts and fictitious employers prior to electronically filing a fraudulent tax return in order to obtain a substantial refund. Some consider the standard deduction inadequate.
Before Tax Day, the IRS, state tax authorities, and tax sector corporations are scrutinizing tax practices. W-2 data are evaluated by the IRS, Social Security Administration, and significant corporations such as ADP. Don’t mislead about jobs online.
The IRS is investigating two W-2 frauds that exploit salary information to seek substantial refunds.
The first fraudulent tax form is Form 7202. Fraudsters recommend claiming this credit for typical employment income as opposed to self-employment income.
The second W-2 scam proposes that taxpayers hire domestic workers. Thieves advocate using Schedule H (Form 1040), Household Employment Taxes, to claim large tax refunds for family and sick payments they never made.
The IRS advises those who attempt W-2 fraud or any other kind of tax evasion that they face a variety of financial and legal consequences. The frivolous return penalty of $5,000 is the most likely punishment.
In addition, a Penalty for an Incorrect Refund or Credit Claim may apply. This penalty applies to applications for excessive refunds or income tax credits made without justification.
This might be up to 20% of the excess amount claimed, so if you falsely claimed a $20,000 refund, you would be fined $4,000.
For filing a fake tax return, filers run the danger of criminal punishment. In similar trials, a single felony charge carried a maximum punishment of three years in prison, a $100,000 fine, and one year of supervised probation.
Read more: Social Security: Is it possible to avoid paying taxes?
How To Fix False Tax Return?
The IRS recommends submitting an updated tax return if you or anyone you know has participated in this W-2 fraud. You could also try visiting a tax expert to get your finances in order.
The following information applies to revised returns:
- File a “superseding return” if your filing deadline and available tax extensions have not elapsed. If you file a second return before the due date, the second return “supersedes” the first and is treated as the original return.
- The IRS can repair the majority of trivial errors, but considerable changes in income require a revised tax return.
- While completing an amended tax return, you’ll likely be required to submit Form 1040X, which is used to:
- Correct Forms 1040, 1040-SR, or 1040-NR;
- Make certain elections after the election deadline;
- Change amounts previously adjusted by the IRS (except IRS changes to interest or penalties); or
- Claim a loss or unused credit carryback.
- You may file revised Forms 1040, 1040-SR, and 1040-NR for tax years beginning after 2018.
- You are required to file an amended tax return within three years of filing your original return or within two years of paying any tax due, whichever is later.
- You can track the status of your modified tax return using the “Where’s My Amended Return?” service or by dialing (866) 464-2050.
Tax professionals can offer more extensive IRS reconciliation assistance. Local tax preparers can be found using the IRS’s Directory of Federal Return Preparers.
If you like a few, you should request their qualifications and investigate their history and reputation with the Better Business Bureau. Avoid tax preparers who charge a fee or refuse to sign your return before filing.
Read more: Social Security: Best retirement account to help you retain more of your benefits
