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IRS Issues Warning About Tax Fraud Schemes Involving Form W-2

BY: Jyme Mariani, Esq. | 03/09/23

The IRS issued a consumer alert that employers can pass on to their employees to help them be aware of tax scams involving Form W-2, Wage and Tax Statement [IR-2023-38, 3-3-23]. The alert warns taxpayers of scams that urge people to use fake wage information on a tax return to claim credits, for which they are not eligible, with the promise of getting a big refund.

The IRS said it is actively watching for these schemes, and the agency is working with payroll companies, large employers, and the Social Security Administration to verify information submitted on Forms W-2.

Recent Scams

One scam, which the IRS has seen on social media, encourages people to use tax software to manually fill out a Form W-2 with false income information. In this scheme, scam artists suggest people make up large income and withholding figures as well as the employer the Form W-2 is coming from. The scam artists then instruct people to file a bogus tax return electronically in hopes of getting a substantial refund.

The IRS said it is seeing two variations of this scam:

  • One variation involves scammers telling people to file 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 and not as a self-employed individual. These credits only were available for self-employed individuals for 2020 and 2021 during the COVID-19 pandemic. The credits are not available for 2022 tax returns.
  • A similar variation involves scammers encouraging people to make up fictional employees employed in their household and to file Schedule H (Form 1040), Household Employment Taxes, to try to claim a refund based on false sick and family wages.

To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!

Jyme Mariani, Esq., is Managing Editor of Payroll Currently and Senior Manager of Payroll Information Resources for the APA.