WASHINGTON — The Internal Revenue Service today announced the agency will enhance the identity authentication process that financial institutions can use to register under the Foreign Account Tax Compliance Act (FATCA). 

Taxpayers as of July 14 are required to sign in or register with either of the IRS’ credential service providers, Login.gov or ID.me, to access the FATCA registration system. FATCA requires most U.S. taxpayers holding financial assets outside the U.S. and certain foreign financial institutions to report assets and financial accounts to the IRS.

Taxpayers who already have a Login.gov or an ID.me profile will be able to sign in to the FATCA Registration System as long as the email matches that of the responsible officer or point of contact on the FATCA registration.

Taxpayers that don’t already have a Login.gov or ID.me profile will need to create one to access the system. The new authentication requirement complies with National Institute of Standards and Technology digital identity guidelines.

To create a new profile with either Login.gov or ID.me, the taxpayer will need to verify an email address, create a password and set up multi-factor authentication to secure their FATCA account. Both ID.me and Login.gov have help desks to assist taxpayers who have difficulty using the systems.

For questions and assistance regarding Login.gov, please visit the Login.gov help center. For questions and assistance regarding ID.me, please visit Verifying for the Internal Revenue Service – ID.me Help Site.

Revenue Ruling 2024-15 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274.

The rates are published monthly for purposes of sections 42, 382, 412, 642, 1288, 1274, 7520, 7872, and various other sections of the Internal Revenue Code.

Revenue Ruling 2024-15 will be in IRB: 2024-32, dated August 5, 2024.

Week 2 of “Protect Your Clients; Protect Yourself” series focuses on evolving threats 

WASHINGTON — In the second installment of a special series, the Internal Revenue Service and Security Summit partners warned tax professionals to be aware of evolving phishing scams and cloud-based schemes designed to steal sensitive taxpayer information.

The IRS and Security Summit partners – representing state tax agencies and the nation's tax industry – continue to see a steady stream of e-mail and related attacks aimed at the nation's tax professional community. These are designed to steal sensitive tax and financial information from clients.

The variants of these email attacks routinely number in the hundreds and can target tax professionals whether it’s tax season or not.

“We continue to see a barrage of email and related attacks designed to trick tax professionals and gain access to their sensitive information,” said IRS Commissioner Danny Werfel. “These attempts can be elaborate, multi-layered efforts that look convincing and can easily fool people. Tax professionals need to be wary and educate their employees to use extra caution to protect their clients and their businesses.”

This is the second release in an eight-part “Protect Your Clients; Protect Yourself” summer series, part of an annual education effort by the Security Summit, a group that includes tax professionals, industry partners, state tax agencies and the IRS. The public-private partnership has worked since 2015 to protect the tax system against tax-related identity theft and fraud.

These security tips will be a key focus of the Nationwide Tax Forum, which will be in five cities this summer throughout the U.S. In addition to the series of eight news releases, the tax professional security component will be featured at the forums, which are three-day continuing education events. The remaining forums begin July 30 in Orlando, August 13 in Baltimore, August 20 in Dallas and September 10 in San Diego. 

The IRS reminds tax pros that registration deadlines are quickly approaching for several of the forums, and Orlando is already sold out.  

Phishing, spear phishing, clone phishing and whaling  

One of the most common threats facing tax pros are phishing and related scams. These are designed to trick the recipient into disclosing personal information such as passwords, bank account numbers, credit card numbers or Social Security numbers.

Tax professionals and taxpayers should be aware of different phishing terms and what the email scams might look like:

• Phishing/Smishing – Phishing emails or SMS/texts (known as “smishing”) attempt to trick the recipient into clicking a suspicious link, filling out information or downloading a malware file. Often phishing attempts are sent to multiple email addresses at a business or agency increasing the chance someone will fall for the trick.

• Spear phishing – A specific type of phishing scam that bypasses emailing large groups at an organization, but instead identifies potential victims and delivers a more realistic email known as a “lure.” These types of scams can be trickier to identify since they don't occur in large numbers. They single out individuals, can be specialized and make the email seem more legitimate. Scammers can pose as a potential client for a tax professional, luring the practitioner into sharing sensitive information.
• Clone phishing – A newer type of phishing scam that clones a real email message and resends it to the original recipient pretending to be the original sender. The new message will have either an attachment that contains malware or link that tries to steal information from the tax professional or recipient.

• Whaling – Whaling attacks are very similar to spear phishing, except these attacks are generally targeted to leaders or other executives with access to secure large amounts of information at an organization or business. Whaling attacks can also target people in payroll offices, human resource personnel and financial offices.

Security Summit partners continue to see instances in which tax professionals have been particularly vulnerable to emails posing as potential clients. In the “new client” scam, the criminals use this technique to trick practitioners into opening email links or attachments that infect computer systems with the potential to steal client information. Similar schemes are seen with whaling situations where scammers try to obtain a large amount of information with legitimate-looking email requests.

Warning signs of a scam  

Regardless of the type of phishing attempt, tax pros can protect themselves and their organization by being aware of these scams and looking for warning signs like these:

• An unexpected email or text claiming to come from a known or trusted source such as a colleague, bank, credit card company, cloud storage provider, tax software provider or even the IRS and other government agencies.

• Receiving a duplicate email from what appears to be a known trusted source that contains a new attachment or hyperlink.

• A message, often with an urgent tone, urging the receiver to open a link or attachment. These messages have a false narrative, like someone’s password has expired or some other urgent action is needed.
• An email address, number or link that's slightly misspelled or has a different domain name or URL (irs.com vs. IRS.gov). A closer look at these email addresses – like hovering the cursor over the email address – can show slight variations on legitimate addresses.

“There are major red flags that can be easily overlooked, so tax professionals and taxpayers should be extra careful and look closely when they receive an email from an official looking source,” Werfel said.

Cloud-based schemes remain a threat  

Tax professionals using cloud-based systems that store information or run tax preparation software should use multi-factor authentication to help safeguard that data. The Federal Trade Commission now requires all practitioners to secure sensitive client personally identifiable information (PII) using multi-factor authentication.

Specifically, the Security Summit continues to see attacks that take advantage of cloud-based systems and compromise personal information. Multi-factor authentication options provide an additional layer of security to access a system by using a phone, text messages or tokens. Since email is easier for identity thieves to access, having these layers of security helps guard against potential vulnerabilities.

Additional resources  

For tax professionals who are victim of any of these schemes or identity theft, the IRS urges them to quickly contact their IRS Stakeholder Liaison to provide details of the situation. Tax professionals can also share information with the appropriate state tax agency by visiting a special “Report a Data Breach” page with the Federation of Tax Administrators.

Quickly reporting these incidents can not only protect the tax pro's clients, but it can also help provide critical information quickly to help prevent these attacks from hitting others in the tax community.

Tax professionals should also understand the Federal Trade Commission’s data breach response requirements as part of their overall information and data security plan. There’s a new requirement to report an incident to the FTC when 500 or more people are affected within 30 days of the incident.

To help taxpayers navigate these issues and meet the requirement to have a security plan, the Security Summit has prepared a sample Written Information Security Plan. This template can help tax pros, including smaller practitioners, protect themselves from ongoing security threats.

Tax professionals should also review IRS Publication 4557, Safeguarding Taxpayer Data, for more information.

Other resources include Small Business Information Security: The Fundamentals, by the National Institute of Standards and Technology and the IRS' Identity Theft Central pages for tax pros.

Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on IRS.gov. The IRS also encourages tax professionals to stay connected to the IRS for its latest updates and alerts through subscriptions to e-News for Tax Professionals and its social media sites.

Taxpayers urged to talk to a trusted tax professional, not rely on marketers or social media for tax advice

 IR-2024-187, July 15, 2024

WASHINGTON — The Internal Revenue Service issued a consumer alert today following bad advice circulating on social media about a non-existent “Self Employment Tax Credit” that’s misleading taxpayers into filing false claims.

Promoters and social media are marketing something they describe as the “Self Employment Tax Credit” as a way for self-employed people and gig workers to get big payments for the COVID-19 pandemic period. Similar to misleading marketing around the Employee Retention Credit, there is inaccurate information suggesting many people qualify for the tax credit and payments of up to $32,000 when they actually do not.

In reality, the underlying credit being referred to in social media isn’t called the “Self Employment Tax Credit,” it’s a much more limited and technical credit called Credits for Sick Leave and Family Leave. Many people simply do not qualify for this credit, and the IRS is closely reviewing claims coming in under this provision so people filing claims do so at their own risk.

“This is another misleading social media claim that’s fooling well-meaning taxpayers into thinking they’re due a big payday,” said IRS Commissioner Danny Werfel. “People shouldn’t be misled by outlandish claims they see on social media. Before paying someone to file these claims, taxpayers should consult with a trusted tax professional to see if they meet the very limited eligibility scenarios.”

People who were self-employed can claim Credits for Sick and Family Leave only for limited COVID-19 related circumstances in 2020 and 2021; the credit is not available for 2023 tax returns. The IRS is seeing repeated instances where taxpayers are incorrectly using Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to incorrectly claim a credit based on income earned as an employee and not as a self-employed individual.

To qualify for the Sick and Family Leave Credits, self-employed workers have to meet a variety of technical reasons in 2020 and 2021 that didn’t allow them to work, including caring for an individual subject to a quarantine or isolation order. The IRS has a detailed set of FAQs describing the very technical requirements for meeting this provision of the law.

The IRS is seeing some similarities to marketing around this “Self Employment Tax Credit” similar to aggressive promotion of the Employee Retention Credit. Both are technical credits that have been mischaracterized by some as a way for average taxpayers to get a big government payment. In reality, these are very limited credits that have a variety of complex requirements before people can qualify.

The IRS urges people to check with a trusted tax professional before filing for any “Self Employment Tax Credit” or any other questionable tax claim circulating on social media.

The IRS has previously warned taxpayers about misuse of the Sick and Family Leave Credits stemming from various tax scams and inaccurate social media advice that led thousands of taxpayers to file inflated refund claims during the past tax season.

In addition to the Sick and Family Leave Credit, the IRS warned taxpayers not to fall for these scams centered around the Fuel Tax Credit and household employment taxes. The IRS has seen thousands of dubious claims come in 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.

The IRS continues to urge taxpayers to avoid these scams as myths continue to persist that these are ways to obtain a huge refund. Many of these scams were highlighted during this spring’s annual Dirty Dozen series, including the Fuel Tax Credit scam, bad social media advice and “ghost preparers.”

“These improper claims have been fueled by social media and people sharing bad advice,” Werfel said. “Scam artists constantly prey on people’s hopes and try to use the complexity of the tax system to convince people there are secret ways to get a big refund. All of these scams illustrate that it’s important to carefully review the tax return for accuracy before filing and rely on the advice of a trusted tax professional, not someone trying to make a quick buck or a questionable source on social media.”

Inside This Issue

1. Security Summit partners urge continued vigilance against evolving scams to tax professionals, businesses and clients
2. IRS Nationwide Tax Forum: Registration still open for Baltimore, Dallas
3. IRS collects $1 billion in past due taxes collected as compliance efforts continue
4. Custodial brokers required to report sales and exchanges of digital assets
5. Career opportunities at the IRS Independent Office of Appeals
6. Clean Fuel Production Credit Registration: Treasury, IRS issue FAQs
7. Upcoming webinar for tax practitioners

1.  Security Summit partners urge continued vigilance against evolving scams to tax professionals, businesses and clients

The IRS and Security Summit cautioned tax professionals to remain vigilant against emerging identity theft schemes. Protect Your Clients; Protect Yourself news release series, a special initiative of the Security Summit, kicked off this week. The news release series will offer crucial information to help safeguard sensitive taxpayer data. This campaign aims to raise tax professionals’ awareness of identity theft and security threats and how to protect themselves and their clients from them.

Scammers are using a variety of techniques to obtain private information from tax experts. Tax professionals should exercise caution to avoid becoming victims of these attacks, which put their businesses and clients at risk. Here are some trending examples that tax professionals should watch out for:

• Beware of the “new client” scheme;
• Multiple phishing scams involving EPINs, PTINs, CAF numbers; and
• Phone, text and correspondence schemes.

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2.  IRS Nationwide Tax Forum: Registration still open for Baltimore, Dallas

Have you reserved your space for the 2024 IRS Nationwide Tax Forum? 

The five-city program, which kicked off this week in Chicago, is sold out in Orlando (July 30-Aug. 1) and San Diego (Sept. 10-12). But tax professionals can still secure a spot in:

• Baltimore: Aug. 13-15 or 
• Dallas: Aug. 20-22

The IRS Nationwide Tax Forum provides continuing education credit for enrolled agents, certified public accountants, Annual Filing Season Program participants and California Tax Education Council participants. Attendees can earn up to 19 CE credits this year, participate in a series of special events, see the latest industry offerings in the Expo Hall, make an appointment with the popular Case Resolution Room, and network with fellow tax professionals.

For information on special events and to register, visit IRS Nationwide Tax Forum.

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3.  IRS collects $1 billion in past due taxes collected as compliance efforts continue

The IRS announced it has collected overdue taxes totaling over $1 billion from high-wealth groups, corporations and partnerships as part of continuing compliance efforts under the Inflation Reduction Act. Today’s announcement includes a segment of high-income individual taxpayer cases. Last fall, the IRS ramped up efforts to pursue high-income, high-wealth individuals who failed to pay a tax bill. These high-end collection cases are concentrated among taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt.

“With this collection activity, the IRS passed an important milestone in our effort to improve compliance and ensure fairness in the tax system,” said IRS Commissioner Danny Werfel. “Our increased work in this area means these past-due tax bills from high-end taxpayers are no longer being left on the table, like they were too often in the past.”

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4.  Custodial brokers required to report sales and exchanges of digital assets

The U.S. Department of the Treasury and the Internal Revenue Service issued final regulations requiring custodial brokers to report sales and exchanges of digital assets, including cryptocurrency. These reporting requirements will help taxpayers to file accurate tax returns with respect to digital asset transactions, which are already subject to tax under current law.

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5.  Career opportunities at the IRS Independent Office of Appeals

Tax pros: Are you interested in elevating your international tax experience to the next level? If so, the IRS Independent Office of Appeals is hiring for our Appeals Officer (International Specialist) position in multiple locations throughout the United States including Puerto Rico.

For more information, register for the Virtual IRS Appeals Officer - International Tax Specialist Session on July 17, 2024 from 1:00PM – 2:30PM EST. You’ll hear about the benefits of working for Appeals, get resume and application tips, and have a chance to ask questions!

To register, click the following link: Join our Virtual IRS Appeals Officer International Tax Specialist Session.

You can apply to this exciting opportunity at Appeals Officer (International Specialist) now through July 31, 2024.

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6.  Clean Fuel Production Credit Registration: Treasury, IRS issue FAQs

The Department of Treasury and the IRS published frequently asked questions (FAQs) in Fact Sheet 2024-25, regarding which entities are required to apply for registration for the Clean Fuel Production Credit. Guidance on how to apply for registration and what documentation a clean fuel producer needs to include with their application is outlined in Notice 2020-49.

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7.  Upcoming webinar for tax practitioners

The IRS offers the upcoming live webinar to the tax practitioner community:

Understanding Form 2290 - Heavy Highway Vehicle Use Tax on July 18, at 2 p.m. ET. Earn up to 2 CE credits (Federal tax). Certificates of completion are being offered.

For more information or to register, visit Webinars for tax practitioners webpage.

WASHINGTON — The Internal Revenue Service would like to remind car dealers and sellers to be aware of evolving phishing and smishing scams that could impact day-to-day operations of the business.

In light of the recent ransomware attack aimed at car dealers, the IRS is warning individuals and businesses to remain vigilant against these attacks. Fraudsters and identity thieves attempt to trick the recipient into clicking a suspicious link, filling out personal and financial information or downloading a malware file onto their computer.

Scammers are relentless in their attempts to obtain sensitive financial and personal information, and impersonating the IRS remains a favorite tactic. The IRS urges car dealerships to be extra cautious about unsolicited messages and avoid clicking any links in an unsolicited email or text if they are uncertain.

Phish or smish: Don’t take the bait

The IRS continues to see a barrage of email and text scams targeting businesses and individual taxpayers. The IRS and the Security Summit partners continue to remind taxpayers, businesses and tax professionals to be alert for a wide variety of these scams and schemes. Businesses such as car dealerships should remain alert for targeted email and text scams aimed to disrupt their computer systems.

These businesses should be alert to fake communications posing as legitimate organizations. These messages arrive in the form of unsolicited texts or emails to lure unsuspecting victims to provide valuable information that can lead to identity theft or malicious malware installed on computer systems. There are two main types:

• Phishing: An email sent by fraudsters claiming to come from a legitimate source. The email lures the victims into the scam with a variety of ruses such as enticing victims to provide sensitive information.

• Smishing: A text or smartphone SMS message where scammers often use alarming language such as, "Your account has now been put on hold," or "Unusual Activity Report," with a bogus "Solutions" link to restore the recipient's account.

Never click on any unsolicited communication as it may surreptitiously load malware. It may also be a way for malicious hackers to load ransomware that keeps the legitimate user from accessing their system and files.

In some cases, phishing emails appear to come from a legitimate sender or organization that has had their email account credentials stolen. Setting up two-factor or multi-factor authentication with their email provider will reduce the risk of individuals having their email account compromised.

Posing as a trusted organization, friend or family member remains a common way to target individuals and businesses for various scams. Individuals and businesses should verify the identity of the sender by using another communication method, for instance, calling a number they independently know to be accurate, not the number provided in the email or text.

What to do

• Never respond to phishing or smishing or click on the URL link.
• Don't open any attachments. They can contain malicious code that may infect the computer or mobile phone.
• Don't click on any links. If a taxpayer inadvertently clicked on links in a suspicious email or website and entered confidential information, visit the IRS’ identity protection page.
• Send the full email headers or forward the email as-is to phishing@irs.gov. Don't forward screenshots or scanned images of emails because this removes valuable information.
• Delete the original email.

WASHINGTON – As part of continuing compliance efforts under the Inflation Reduction Act, the Internal Revenue Service today announced the agency has surpassed the $1 billion mark in collections from high-wealth taxpayers with past-due taxes.

As part of larger efforts taking place, the IRS has stepped up activity specifically on 1,600 individuals whose incomes were more than $1 million per year and who each owed the IRS more than $250,000 in recognized tax debt. Since last fall, this IRS compliance effort has generated more than $1 billion in collections from this group, with work continuing in this area.

“With this collection activity, the IRS passed an important milestone in our effort to improve compliance and ensure fairness in the tax system,” said IRS Commissioner Danny Werfel. “Our increased work in this area means these past-due tax bills from high-end taxpayers are no longer being left on the table, like they were too often in the past.”

“Years of funding declines meant the IRS couldn’t get to money that we knew was owed, but we simply didn’t have the resources or staffing to collect,” Werfel added. “Funding from the Inflation Reduction Act is reversing a decade-long decline in our compliance work, including increasing our compliance work involving the wealthiest individuals and groups with tax issues. The collection results achieved in less than a year reveal the magnitude of what can be achieved over the long run as our Inflation Reduction enforcement continues to ramp up in the months ahead.”

Werfel noted that Inflation Reduction Act resources continue to help in a variety of areas. In addition to  improving taxpayer service during the successful 2024 filing season, the IRS has focused IRA resources on expanded enforcement work to pursue complex partnerships, large corporations and high-income, high-wealth individuals who do not pay overdue tax bills.

“We continue working to add staff and technology to ensure that the taxpayers with the highest income, including partnerships, large corporations and millionaires and billionaires, pay what is legally owed under federal law,” Werfel said. “At the same time, we are focused on improving our taxpayer service for hard-working taxpayers. The additional resources the IRS received under the Inflation Reduction Act are making a difference, both for taxpayers who play by the rules and those who don’t.”

Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated maneuvers that the wealthiest taxpayers use to hide their income and evade paying their share. The IRS is continuing to take action to close this gap. 

Today’s announcement involves a segment of high-income individual taxpayer cases. Last fall, the IRS ramped up efforts to pursue high-income, high-wealth individuals who failed to pay a tax bill. These high-end collection cases are concentrated among taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt.

Out of a total of 1,600 of these cases, the IRS has assigned 1,500 to revenue officers, with over $1 billion collected so far. The $1 billion collected through spring represents payments from over 1,200 individuals, with the IRS anticipating the figure to grow in the months ahead.

IRS continues work on high-wealth non-filers, complex partnerships, large corporations

The IRS has a variety of other efforts underway to improve tax compliance in overlooked areas where the agency did not have adequate resources prior to Inflation Reduction Act funding.

Earlier this year, the IRS announced a new effort focused on high-income taxpayers who have failed to file federal income tax returns in more than 125,000 instances since 2017. Non-filers receive IRS compliance letters alerting them that the IRS is aware of their missing return and encouraging them to file or contact the IRS. The new initiative involves more than 25,000 people with more than $1 million in income, and over 100,000 people with incomes between $400,000 and $1 million between tax years 2017 and 2021.

These are all cases where the IRS has received third party information—such as through Forms W-2 and 1099s—indicating these people received income in these ranges but failed to file a tax return. Without adequate resources, the IRS non-filer program has only run sporadically since 2016 due to severe budget and staff limitations that didn’t allow these cases to be worked. With new Inflation Reduction Act funding available, the IRS now has the capacity to do this core tax administration work.

The IRS anticipates having more details related to this non-filer initiative later this year.

Other elements of the agency’s renewed compliance focus include:

• Abusive use of partnerships. Last month, the IRS announced a new series of steps to combat abusive partnership transactions that allow wealthy taxpayers to avoid paying what they owe.

• Activities involving large corporations and partnerships. These efforts include opening examinations of 76 of the largest partnerships in the U.S., representing a cross section of industries including hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms and other industries. Other activities include expanding the large corporate compliance (LCC) program.
• Aircraft use. In February, the IRS announced plans to begin dozens of audits involving personal use of business aircraft. The audits will focus on aircraft usage by large corporations, large partnerships and high-income taxpayers. The IRS will examine whether the use of jets is being properly allocated between business and personal use.

WASHINGTON – The Internal Revenue Service today issued frequently asked questions (FAQs) in Fact Sheet 2024-25 related to which entities must apply for registration for the Clean Fuel Production Credit. 

The Inflation Reduction Act of 2022 (IRA) added a new income tax credit for clean fuel production, available beginning Jan. 1, 2025. To claim a Clean Fuel Production Credit the taxpayer must be registered as a producer of clean fuel at the time of production. 

Notice 2024-49 provides guidance on the registration procedures for the Clean Fuel Production Credit, including how to apply for registration and what information a clean fuel producer must submit with its application. 

These FAQs address which entity must apply for registration pursuant to Notice 2024-49, including if the entity producing the clean fuel is a disregarded entity, and also which entity will be able to claim the credit when the registrant is a disregarded entity. 

More information about IRA credits and deductions can be found at Credits and deductions under the Inflation Reduction Act of 2022.

IRS-FAQ

Week 1 of “Protect Your Clients; Protect Yourself” series focuses on new and old scams, schemes

WASHINGTON – The Internal Revenue Service and the Security Summit renewed a warning today to tax professionals to be on the lookout for a variety of new and evolving schemes aimed at stealing business and taxpayer information. 

Identity thieves are taking numerous approaches to steal sensitive information from tax professionals. This includes posing as new clients; using phishing emails to trick people into sharing Central Authorization File information as well elaborate schemes involving calling and texting. Tax professionals need to be on the lookout to avoid falling prey to these attacks, which threaten not just their clients but their businesses. 

“As the Security Summit partners have continued to improve our defenses against identity theft, thieves have upped their game by targeting tax professionals to get valuable information needed to file authentic-looking tax returns,” IRS Commissioner Danny Werfel said. “Tax professionals need to watch out for deviously clever scams that can masquerade as new clients as well as communications from the IRS or others in the tax community. We continue to see tax professionals bombarded by these scams, and people shouldn’t let their defenses down.” 

The alert comes as part of an annual education effort by the Security Summit partners, a coalition of tax professionals, industry partners, state tax groups and the IRS. Started in 2015, the public-private partnership works to protect the tax system against tax-related identity theft and fraud. 

This marks the opening week of a special Security Summit summer news release series called “Protect Your Clients; Protect Yourself.” The campaign is aimed at increasing awareness among tax professionals on ways to shield themselves and their clients from identity theft and security threats. 

Now in its ninth year, the “Protect Your Clients; Protect Yourself” series will feature news releases each Tuesday for eight weeks. The series coincides with the Nationwide Tax Forum, a three-day seminar starting today in Chicago and continues with sessions the week of July 30 in Orlando, August 13 in Baltimore, August 20 in Dallas and September 10 in San Diego. The IRS reminds tax pros that registration deadlines are quickly approaching for several of the forums, and Chicago and Orlando are already sold out. 

The IRS forums will feature several specific sessions to help educate the tax professional community on security-related topics. Tax professionals will hear from experts at the IRS, the tax professional community as well as a special session from the Salve Regina University’s Pell Center from Rhode Island. The entire news release series will be available in Spanish as well. 

As part of this effort, the IRS and Security Summit partners are warning against the most recent wave of activity coming from tax scammers. Here are some trending examples that tax professionals should watch out for: 

Beware of the “new client” scheme 

In this form of so-called spear phishing, fraudsters pretend to be real taxpayers seeking tax pros’ help with their taxes. They use emails to try to get sensitive information or gain access to a practitioner’s client data. In these fake “new client” schemes, the fraudster can send a malicious attachment or include a link to a site that the tax professional thinks they need to access to obtain the supposed new client’s tax information. But in reality, the site is collecting information from the tax pro, such as their email and password, or loading malware onto the tax pro’s computer to gain access to their computer or system. 

While not a fresh scam, the IRS continues seeing activity this year. It remains an ongoing threat that can be alluring to a tax professional or a practice’s employees seeking new business. And while this fake outreach can peak around tax season, this sort of scam remains a threat year-round. 

Look out for multiple phishing scams involving EFINs, PTINs, CAF numbers 

Another scam circulating on a large scale this year involves phishing attempts by scammers trying to obtain various identification numbers used by tax professionals, including their Electronic Filing Identification Number or EFIN; EFIN documents; their Preparer Tax Identification Number or PTIN; and their Centralized Authorized File or CAF number. 

Obtaining these digits helps a bad actor obtain information and file a fraudulent return that looks legitimate. Scammers are trying to get these sensitive identification numbers by sending emails or texts that appear to be from the IRS. The scammers tell tax pros they need to confirm this information by entering it into a form that was hosted on what appears to be a real IRS website, but in reality is a fake website designed to mimic the real thing. 

For example, a fraudster with a compromised CAF number in hand can use it to obtain tax transcripts and other sensitive taxpayer personally identifiable information (PII) to commit identity theft refund fraud and other crimes. In many cases, the fraudster has not only obtained a practitioner’s CAF number but also has the tax professional’s sensitive personal information. 

Watch and listen for phone, text and correspondence schemes 

Tax professionals should also be aware of another wave of scams hitting taxpayers with frequency, with identity thieves using phone calls and text messages to get Social Security numbers, birth dates and banking information from victims. Several of these schemes are common right now that can target not just taxpayers, but potentially tax professionals and their clients, including: 

• Artificial intelligence or AI scams used for false correspondence, with AI being used to create fake IRS letters that are mailed to victims.
• The so-called Zero Tax program, in which callers promise to wipe out tax debt for people who owe back taxes. The callers request people’s Social Security numbers as part of their pitch, which they use for nefarious purposes. Tax professionals should watch out for clients reporting this scheme.
• Social media scams circulating inaccurate or misleading tax information that can involve creating common tax documents that are false like a Form W-2 or claiming credits to which the taxpayer is not entitled like the Fuel Tax Credit, Sick and Family Leave Credit and household employment credits.
• Scammers reaching out by phone or text message to dupe people into handing over sensitive financial information in exchange for a false promise of IRS money for them. 

Ways to avoid and report scams 

People that receive scams by email should send the email to phishing@irs.gov. As a reminder, people can forward the message, but IRS cybersecurity experts prefer to see the full email header to help them identify the scheme. 

For tax professionals who discover they are victims of a security breach, they should contact their IRS Stakeholder Liaison to report a theft. The local IRS Stakeholder Liaison will ensure the appropriate IRS offices are alerted. If incidents are reported quickly, the IRS can take steps to block fraudulent returns in the clients’ names and will assist tax pros through the process. 

Tax professionals can also share information with the appropriate state tax agency by visiting a special “Report a Data Breach” page with the Federation of Tax Administrators. 

Tax professionals should also understand the Federal Trade Commissioner data breach response requirements as part of their overall information and data security plan. The new Written Information Security Plan, or WISP, that tax pros are required to have also notes there’s a new requirement to report an incident to the FTC when 500 or more people are affected within 30 days of the incident.

The Internal Revenue Service issued alert IR-2024-139 about a series of scams and inaccurate social media advice. Social media schemes led to thousands of inflated refund claims during the past tax season. The IRS has increased its compliance efforts related to false and/or questionable credits. 

These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they may be updated or modified upon further review. 

Background

The IRS warns taxpayers not to fall for these scams centered around the Fuel Tax Credit, the Sick and Family Leave Credit, household employment taxes and overstated withholding. The IRS has seen thousands of dubious claims come in 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. 

The IRS continues to urge taxpayers to avoid these scams as myths continue to persist that these are ways to obtain a huge refund. Many of these scams were highlighted during this spring’s annual Dirty Dozen series, including the Fuel Tax Credit scam, bad social media advice and “ghost preparers.” 

The IRS reminds taxpayers to keep these important points in mind: 

• Social media can connect people and information from all over the globe. Unfortunately, sometimes people provide bad tax advice that can lure good taxpayers into trouble.
• The IRS warns taxpayers to be wary of trusting internet advice, whether it’s a fraudulent tactic promoted by scammers or a deliberately false tax-related scheme trending across popular social media platforms.
• The IRS is aware of various filing season hashtags and social media topics related to this fraudulent information. These generally involve people trying to use legitimate tax forms for the wrong reason. 

General information 

Q1. What happens when the IRS identifies suspicious refund claims? 

A1. Some taxpayers may receive a letter 5747C and/or 4883C/5071C with instructions to verify their identity and tax return information so we can continue processing their tax return. Even after this verification, questionable refunds will continue to be held until credit eligibility is verified. Examples of frequently abused claims include: 

• Fuel Tax Credit (Form 4136).
• Sick and Family Leave Credit for Self Employed Individuals (Form 7202).
• Overstated withholding.
• Schedule H, Household Employment Taxes including Qualified Sick Leave Wages. 

Q2. What should you do if you receive one of these letters from the IRS, identifying your tax return as requiring authentication and/or being potentially frivolous? 

• 3176C Frivolous Correspondence Response.
• 5747C Potential Identity Theft during Original Processing – TAC.
• 5071C Potential Identity Theft during Original Processing with Online Option.
• 4883C Potential Identity Theft During Original Processing. 

A2. Taxpayers in receipt of a 3176C letter should follow the directions on the correspondence. Taxpayers receiving these letters may have previously received a 5747C letter, 5071C letter or 4883C letter. In this instance, disregard the 5747C, 5071C or 4883C. Do not visit a Taxpayer Assistance Center (TAC) or try to authenticate online or over the phone. Instead, follow the directions in the 3176C letter.  

Q3. What actions are needed to avoid legal consequences? 

A3.

• File a complete and accurate return within 30 days of receiving the IRS letter or notice. This may include submitting an amended tax return for each taxable period where an inappropriate claim was filed.
• If applicable, attach the IRS letter received (such as, 3176C) to your corrected return and mail it to the address listed on the correspondence. 

Q4. What are the legal consequences for filing a frivolous return? 

A4.

• Penalties
• • Claims and filings that are based upon a position identified as frivolous by the IRS -or- reflect a desire to delay or impede tax administration are subject to the Internal Revenue Code (IRC) 6702(a) penalty. This penalty is $5,000 for each return (or copy of return) claiming an improper credit as defined above. The penalty is assessed against each spouse on a married filing joint return. (Notice 2010-33)
• Compliance audit
• • Uncorrected frivolous claims may be subject to a compliance audit. Taxpayers may be contacted by an Examination Function and asked to provide documentation related to the claim. The taxpayer will be required to verify eligibility for the credit under the law.
• Criminal prosecution
• • Individuals or preparers who knowingly file false income tax returns may face fines and be subject to criminal prosecution and imprisonment. 

Q5. What is the Fuel Tax Credit? 

A5. The Fuel Tax Credit is a tax credit claimed for various non-taxable use of fuel. It is meant for off-highway business, farming, aviation and commercial fishing use. As such, it is not available to most taxpayers. Taxpayers may be asked to provide specific documentation on their occupation and fuel receipts to verify eligibility. 

Q6. What happens if you fall victim to a Fuel Tax Credit scam? 

A6. If you claim an amount of Fuel Tax Credit that is disproportionate to the income reported on the return or file a claim reflecting an impossible quantity of fuel for the occupation reported, you are subject to an IRC 6702(a) penalty of $5,000 for each return claiming an improper credit. For additional information, refer to Instructions for Form 4136. 

Q7. What is the Sick and Family Leave Credit for self-employed individuals? 

A7. The Sick and Family Leave Credit was enacted in March 2020, the Families First Coronavirus Response Act (FFRCA) intended to help the United States combat COVID-19 by providing small and midsize employers refundable tax credits that reimburse them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19. The FFCRA also created equivalent refundable sick and family leave credits for self-employed individuals based on the individual’s average daily self-employment income and a specified number of days during the tax year that an individual was unable to perform services as a self-employed individual due to reasons related to COVID-19. 

To be eligible, taxpayers must: 

• Have a trade or business as defined in IRC 1402. Generally, self-employment income is a result of the performance of personal services that cannot be classified as wages because an employer-employee relationship does not exist between the payer and the payee.
• Claim only the eligible number of days or wages, but no more than the amount allowed by law.
• Claim the credit based on qualifying self-employed income, but no more than allowable by law. 

Q8. What are the two primary variations of the Sick and Family Leave Credit scheme? 

A8.

• Fraudulent Form 7202: Taxpayers use the 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 were available for self-employed individuals to claim on 2020 and 2021 tax year returns during the pandemic. They are not available to claim on the 2022 or 2023 tax year return.
• Fraudulent Schedule H: Taxpayers “invent” fictional household employees and then file Schedule H (Form 1040), Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid. 

Q9. What is the Overstated Withholding scam? 

A9. The Overstated Withholding scam is a recent scheme circulating on social media encouraging people to use tax software to manually fill out a Form W-2, Wage and Tax Statement, or other information returns, for example Form 1099-NEC or other Form 1099s listed below, to include false income and withholding information. In this Overstated Withholding scheme, scam artists suggest people make up large income and withholding amounts as well as the fictional employer supplying those amounts. Scam artists then instruct people to file the bogus tax return electronically, in hopes of getting a substantial refund due to the large amount of fraudulent withholding. 

The IRS verifies the withholding claimed on tax returns. If the IRS cannot verify the wages, income or withholding credits entered on the tax return, the tax refund will be held pending further review. Taxpayers should always file a complete and accurate tax return. Utilize legitimate information returns, such as Form W-2 issued from an employer, to complete returns correctly. 

There are multiple variations of the overstated withholding credit scheme, including but not limited to the following forms or schedules:

Form W-2	Form 1099-R	Alaskan Dividend Fund
Form W-2G	Form-1099-NEC	Schedule K-1 with Withholding Reported
	Form-1099-DIV Form-1099-OID	Unspecified Source of Withholding Credit Claimed
	Form 1099-B

 

Additional details on these Frequently Asked Questions 

Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability. 

Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so.