The IRS has warned the public of a fraudulent scheme that is now making waves across the United States. The scheme involves taxpayers completely being misled into filing credits they are not entitled to, placing them at a greater risk of financial penalties and interest. This scam usually entails predatory tax preparers who misstate the rules governing clean energy tax credits to convince taxpayers to either acquire or falsely claim credits for which they really do not qualify. This scheme is aimed nearly exclusively at those who make sole filings on their 1040 returns. A common tactic exploited by these bogus preparers is the confusion created by the technicalities of the tax laws, which make such dubious assertions look quite plausible. Taxpayers must be alert and seek the advice of a recognized tax practitioner before attempting to claim complex credits, such as those for clean energy property work.
To Understand Clean Energy Tax Credit, What You Must Know
Clean Energy Tax Tax Credits are aimed at fostering investments in renewable energy and energy-efficient technologies. Although this cannot be characterized as offsetting passive-activity income, it will, however, be regarded as credits against passive-activity income, in one form or another, namely rental-income or limited partnership income.
For other taxpayers, the IRS indicated that most people will lack the type of passive income necessary to take advantage of such credits. The improperly filed claim for such credits can attract dire consequences, including requiring an individual to repay the amount out of hand, and with additional interest and potential penalties. This is crucial for all taxpayers to remember; they should be aware of the qualification requirements and countercheck any person who might offer them readily available tax credits to lessen tax liability.
The Past Similar Tax Scams
This clean energy credit scheme is in keeping with implicit standards in the much broader tax scams. The IRS has previously indicated that fraudulent activity has been in respect of the Fuel Tax Credit, Sick and Family Leave Credit, and household employment taxes. As a general rule, tax scams usually exploit lesser-known provisions in the tax law; hence the taxpayer must therefore exercise vigilance and awareness. These include:
- “Consulting a reputable tax professional,” wherein you should seek insight from an accredited and competent preparer or tax advisor before claiming any complex tax credits.
- Actually verifying for tax credits, one familiarizes himself/herself with the requirements that must be met before any credits can be claimed—the IRS website is quite reliable in providing guidance.
- Being cautious of aggressive promoters: Avoid people or companies that tout significant savings on taxes without explaining completely how such credits work in their particular case.
- Reporting matters of suspicion to help the IRS in saving others from the same victimization.
