IRS warns of social media ‘tax advice’ that can lead to jail time, $5,000 fine – MLive.com

WASHINGTON — With millions of Americans still needing to file their 2024 tax returns, the Internal Revenue Service is warning of “advice” shared on social media that can actually land taxpayers in jail. In particular, the IRS says an ongoing “overstated withholding scheme” can lead to penalties of up to $5,000 in fines and possible jail time if convicted.

The scheme encourages taxpayers to fill out Form W-2, Wage and Tax Statement, or other forms like Form 1099-NEC and other 1099s with incorrect income and withholding information. Taxpayers are told to claim large incomes and withholdings while listing a fictional employer on the form. The scheme suggests filing the return electronically in hopes that a large tax return will be issued based off the fraudulent income and withholdings.

“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,” reads a statement from the IRS on the scheme. “Taxpayers should always file a complete and accurate tax return.”

If the IRS flags the fraudulent return, the agency will contact the taxpayer seeking additional verification of the income. Taxpayers may then be asked to resubmit an amended return with the correct information. If the amended return contains uncorrected information, a compliance audit could be ordered.

Along with the audit, a penalty of $5,000 for each return (or copy of return) claiming an improper credit can be applied to the taxpayer. In cases where a joint tax return is filed, the penalty is assessed against each spouse. Taxpayers who knowingly file false tax returns are subject to criminal prosecution and imprisonment, according to the IRS.

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