The Internal Revenue Service (IRS) has issued a warning to taxpayers about a new scam that involves the purchase of clean energy tax credits. This scam is particularly concerning as it exploits the complexities of tax laws and targets specific groups of taxpayers. Here’s a detailed look at the scam, the tactics used by scammers, and the individuals most at risk.
Understanding the scam
The scam revolves around the misrepresentation of rules for claiming clean energy tax credits under the Inflation Reduction Act (IRA). Unscrupulous tax return preparers are misleading taxpayers into believing they can purchase clean energy tax credits to offset their income tax liabilities. These preparers file returns that improperly claim these credits, which the taxpayers are ultimately unable to benefit from.
The IRS has observed that these scams often involve the use of Form 1040, where taxpayers are misled into claiming credits that are not applicable to their tax situation. The scam exploits the transferability provisions of the IRA, which allow the purchase of eligible federal income tax credits from investments in clean energy.
Warning signs to watch for
Taxpayers should be vigilant and aware of several warning signs that may indicate they are being targeted by this scam:
- Unsolicited offers: Be cautious of unsolicited offers from tax preparers or promoters claiming they can help you purchase clean energy tax credits.
- Complex tax jargon: Scammers often use complex tax jargon to confuse taxpayers and make the scam appear legitimate.
- Promises of large refunds: Be wary of promises of large tax refunds or credits that seem too good to be true.
- Pressure tactics: Scammers may use high-pressure tactics to rush taxpayers into making quick decisions without fully understanding the implications.
Individuals most at risk
While all taxpayers should be cautious, certain groups are more vulnerable to this scam:
- Seniors: Older adults are often targeted because they may be less familiar with the latest tax laws and more trusting of official-looking documents.
- Low-Income individuals: Those with lower incomes may be more likely to respond to promises of significant tax credits or refunds.
- Non-English speakers: Language barriers can make it difficult for non-English speakers to fully understand the details of the scam and recognize red flags.
- Tax professionals: Scammers are also targeting tax professionals to gain access to their clients’ sensitive information. Tax professionals should be extra vigilant and ensure they are up-to-date with the latest IRS guidelines.
How to protect yourself
To protect against this scam, the IRS recommends the following steps:
- Verify the source: Always verify the legitimacy of any tax preparer or promoter offering to help you purchase clean energy tax credits. Check their credentials and look for reviews or complaints.
- Consult a trusted tax professional: Before making any decisions, consult a trusted tax professional who is knowledgeable about clean energy tax credits and the IRA.
- Do not share personal information: Never share personal information, such as Social Security numbers or bank account details, with unsolicited contacts.
- Report suspicious activity: If you suspect you are being targeted by this scam, report it to the IRS immediately. You can forward suspicious emails to phishing@irs.gov and report scam letters through the IRS website.
Scam awareness
The new scam involving clean energy tax credits is a reminder of the importance of vigilance and caution when dealing with tax-related matters. By being aware of the warning signs and taking steps to protect personal information, taxpayers can reduce their risk of falling victim to these scams. Remember, the IRS will never ask for sensitive information via email or mail, and any suspicious communication should be reported immediately.
