STATEN ISLAND, N.Y. -- The Internal Revenue Service (IRS) has issued a statement warning Americans to avoid falling for a new scam involving clean energy tax credits.
The IRS has seen an uptick in “unscrupulous tax return preparers” misrepresenting the rules for claiming clean energy credits under the Inflation Reduction Act (IRA).
“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,” said IRS Commissioner Danny Werfel. “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.”
The scam typically targets taxpayers filing Form 1040, with the preparers filing returns that improperly claim IRA credits in an attempt to offset income taxes, despite the taxpayers being ineligible for them.
Generally, purchased credits can only be used to offset income tax from passive activity, but because most taxpayers don’t have passive income, they are typically ineligible for the purchase of such credits, with the IRS noting that most investment activities are not considered passive income.
Those who claimed credits they are not entitled to must repay the inflated credit, plus interest and possible penalties.
Individuals are advised to consult a trusted tax preparation professional about their potential eligibility to buy credits or claim benefits before filing their returns to avoid any issues.
The IRS has previously warned taxpayers about similar scams, which involved the Fuel Tax Credit, the Sick and Family Leave Credit and household employment taxes.
“Fueled by misleading social media advice and promoters, the IRS has seen thousands of dubious claims come in earlier this year where it appears taxpayers are claiming credits for which they are not eligible, leading to refunds being delayed and the need for taxpayers to show they have legitimate documentation to support these claims,” according to the IRS statement.