What to do now

The IRS received thousands of false tax deductions from taxpayers seeking larger refunds. To reduce this fraud, the agency withheld refunds and asked taxpayers to submit additional documentation to support their claims.

Falsely Claimed Tax Deductions: What to Do Now

In a recent press release, the IRS noted that many taxpayers have been using inaccurate social media posts to falsely claim tax deductions on their federal returns in an attempt to receive larger refunds.

According to the IRS, many influencers on popular social media platforms, including TikTok, encouraged taxpayers to falsely claim certain tax credits, such as the fuel tax credit, sick and family leave tax credits, and paid household employment tax refunds.

“Scam artists and social media posts have perpetuated numerous false and misleading claims that trick innocent taxpayers into believing they are entitled to a large windfall tax refund,” the IRS said in a press release.

These claims were uncovered during the agency’s fraud review process. The agency has now frozen these refunds and sent notices to taxpayers asking them to submit additional documentation to support their claims.

Eligible taxpayers must file an amended tax return to claim the correct refund. Taxpayers can determine whether they must file an amended return by visiting the IRS.gov tool (Need to File an Amended Return?).

If a taxpayer fails to support a falsely claimed tax credit, he or she may be subject to a fine of up to $5,000. Improper billing may also result in subsequent audits or criminal charges.

The IRS recommends that taxpayers review the instructions or consult a financial professional when filing an amended return. According to the IRS, amended returns will not be accepted until the taxpayer submits additional documentation and the original return has been processed.

refund delay

Typically, institutions will not process returns if they suspect fraudulent returns. Rather, it asks taxpayers to verify their identity to ensure that returns have not been filed using stolen ID information.

In these cases, verifying your ID will delay your tax refund. Delays in these refunds are something the IRS has been criticized for in the past.

“Taxpayers who file these claims must realize they have been deceived, will have to go through an extensive review process and will have to wait a long time if they need to receive refunds for other items,” the IRS said.

As of the end of 2023, approximately 500,000 taxpayers still have identity theft cases pending with the IRS. The average wait time for these cases is 19 months, according to National Taxpayer Advocate Erin Collins’ annual report in January.

However, if there is a discrepancy on your return and the IRS requires verification of your ID before processing your refund, the delay will be much shorter.