Internal Revenue Service warns taxpayers about new scam involving improper energy credit claims

WASHINGTON D.C. – The Internal Revenue Service (IRS) issued a scam warning for tax filers nationwide.

On Jul. 3, the IRS warned taxpayers about a new scam involving improperly claimed clean energy tax credits under the Inflation Reduction Act of 2022.

Under the Inflation Reduction Act of 2022, taxpayers can purchase federal income tax credits after making investments in clean energy and those credits can be used to offset the buyer's tax liability explained the IRS.

According to the IRS, tax return preparers have filed for those tax credits on behalf of tax filers claiming the credits can be used to offset taxes on wages, Social Security, and retirement account withdrawals.

The Inflation Reduction Act tax credits are usually only applicable to passive forms of income stated the IRS.

The scam generally targets people filing Form 1040 and malicious tax preparers are improperly claiming those credits for non-applicable forms of income shared the IRS.

"This is another example where scammers are trying to use the complexity of the tax law to entice people into claiming credits they’re not entitled to," said IRS Commissioner Danny Werfel. "Taxpayers should be wary of promoters pushing dubious credits like this and others. The IRS is watching out for this scam, and we urge people to use a reputable tax professional before claiming complex credits like clean energy."

The IRS warns taxpayers claiming inappropriate credits risk future compliance action by the federal tax agency and ultimately taxpayers are responsible for repaying the inflated credit plus interest as well as potential financial penalties.

So what can you do to prevent falling prey to this scam?

The IRS recommends taxpayers consult a reputable tax professional before purchasing clean energy credits.

Consumers can verify if your particular tax situation is eligible by checking out the Inflation Reduction Act of 2022 page on the IRS website, but even the IRS admits these scammers are taking advantage of tough to understand tax regulations.

"Fueled by misleading social media advice and promoters, the IRS has seen thousands of dubious claims come in earlier this year 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," stated the IRS page about the new clean energy credit scam.

Ultimately, the public is expected to report paid tax preparers who act improperly using IRS Form 14242 or mail or fax a completed IRS Form 14242 and any supporting materials to the IRS Lead Development Center in the Office of Promoter Investigations at the address below.

Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677-3405
Fax: 877-477-9135

You can also submit information to the IRS Whistleblower Office and stay aware of the latest scams the IRS has discovered here.