IRS issues nationwide warning

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The IRS has indeed issued a warning about a new scam related to clean energy tax credits. In this scheme, unscrupulous tax return preparers misrepresent the rules for claiming clean energy credits under the Inflation Reduction Act (IRA). Here’s how it works:

  • Scam Details:
    • The scam targets individuals who file Form 1040.
    • Dishonest preparers file returns where individuals improperly claim IRA credits to offset income tax from sources like wages, Social Security, and retirement account withdrawals.
    • These preparers falsely claim that taxpayers can benefit from purchased clean energy credits.
    • However, most taxpayers do not have passive income and a passive income tax liability, which is necessary to benefit from these credits.
  • Risk and Consequences:
    • Taxpayers claiming inappropriate credits risk future compliance action by the IRS.
    • They may be responsible for repaying the inflated credit, plus interest and possible penalties.
  • Advice:
    • Consult a trusted tax professional before claiming complex credits like clean energy.
    • Understand the limitations under the passive activity rules and other portions of the tax code that may apply to your situation.
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via AL:

Another day, another scam.

This time, the Internal Revenue Service is warning taxpayers not to fall victim to a new emerging scam involving the purchase of clean energy tax credits.

“Unscrupulous tax return preparers,” are misrepresenting the rules for clean energy credits and telling people they can receive credits for which they actually don’t qualify, the IRS said in a statement. The scam generally targets individuals who file Form 1040 that’s used to determine how much you owe the IRS or if you’re due a tax refund.

“This is another example where scammers are trying to use the complexity of the tax law to entice people into claiming credits they’re not entitled to,” IRS Commissioner Danny Werfel said in a statement. “Taxpayers should be wary of promoters pushing dubious credits like this and others. The IRS is watching out for this scam, and we urge people to use a reputable tax professional before claiming complex credits like clean energy.”

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The tax credits can only be purchased to offset income tax from what the IRS calls “passive activity,” like rental property or some limited partnerships. Most taxpayers do not have passive income or passive income tax liability, the IRS said.

Claiming these credits improperly can run the filer afoul of the IRS and they could end up being responsible for repaying the inflated credit, plus interest and possible penalties. Taxpayers are advised to consult a tax professional and be on alert if anyone offers them credits to purchase to lower their tax liability.

The clean energy credit scam is just the latest identified by the IRS. In the past, similar scams have involved the Fuel Tax Credit, the Sick and Family Leave Credit and household employment taxes.

Sources:

www.blackenterprise.com/irs-warns-of-new-scam-targeting-taxpayers/

www.accountingtoday.com/news/irs-warns-of-clean-energy-tax-credit-scam

www.consumeraffairs.com/news/be-careful-when-buying-clean-energy-tax-credits-irs-warns-070524.html

www.irs.gov/newsroom/irs-warns-of-new-scam-targeting-clean-energy-tax-credit

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