IRS Warns of New Form W-2 Wage Scams to Avoid During Filing Season

The IRS has just issued a consumer alert about fraudulent schemes that prey on unsuspecting individuals, encouraging them to use phony wage information on their tax returns to falsely claim credits and receive a larger refund

One new scam is making the rounds on social media. The scam urges people to use tax software to manually fill out Form W-2, Wage and Tax Statement with false income information, and file a bogus tax return electronically in hopes of receiving a massive refund. These scam artists suggest people make up large income and withholding figures, as well as employer information, to receive a large refund, sometimes up to five figures.

The IRS, along with tax industry and state partners, are keeping a watchful eye out for this and other fraudulent schemes. And also collaborate with payroll companies, large employers, and the Social Security Administration to verify W-2 information and prevent these scams.

National Consumer Protection Week

As National Consumer Protection Week commences next week, the IRS and the Security Summit partners urge individuals to be vigilant and avoid falling for these fraudulent schemes.

Acting IRS Commissioner Doug O’Donnell said, “We are seeing signs this scam is increasing, and we worry that innocent taxpayers could be at risk of being tempted into falling into a trap that puts them at risk of financial and criminal penalties.” and stated, “The IRS and Security Summit partners remind people there is no secret way to get free money or a big refund. People should not make up income and try to submit a fraudulent tax return in hopes of getting a huge refund.”

The IRS has uncovered two variations of this fraudulent scheme that involve manipulating Form W-2 wage information to get a bigger refund:

• One variation involves misusing Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to claim a credit based on income earned as an employee, not as a self-employed individual, during the pandemic in 2020 and 2021, but it is not applicable for 2022 tax returns.
•  Another variation involves fabricating employees and using Schedule H (Form 1040), Household Employment Taxes, to claim a refund for false sick and family wages they never paid. The form reports household employment taxes for wages subject to Social Security, Medicare, or FUTA taxes, or for which the employer withheld federal income tax.

The IRS warns attempting these schemes can result in severe consequences, including a $5,000 frivolous return penalty and even criminal charges for filing a false tax return. For those who have already fallen victim to these scams, the IRS suggests either amending previous tax returns or seeking help from a reliable tax professional.