Dirty Dozen: Watch out for third-party promoters of false fuel tax credit claims

IR-2023-55, March 23, 2023, WASHINGTON — As part of this year’s Dirty Dozen tax scams, the Internal Revenue Service today warned taxpayers to watch out for promoters pushing improper fuel tax credit claims that taxpayers aren’t qualified to receive.

 

The false fuel credit claims mark another important item on the IRS annual Dirty Dozen list on day four of the annual campaign.

 

“People should watch out for erroneous fuel tax credit claims and the scammers that promote them,” said IRS Commissioner Danny Werfel. “These scammers will often charge a hefty fee for these bogus claims, and participants also face the possibility of identity theft. This is another example that people should always remember: Be wary if a tax deal sounds too good to be true.”

 

The Dirty Dozen is an annual IRS list of 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal data and more. Some items on the list are new, and some make a return visit. While the list is not a legal document or a formal listing of agency enforcement priorities, it is intended to alert taxpayers, businesses and tax preparers about scams at large.

 

As a member of the Security Summit, the IRS, with state tax agencies and the nation’s tax industry, have taken numerous steps over the last eight years to warn people to watch out for common scams and schemes each tax season that can contribute to tax-related identity theft. Along with the Security Summit initiative, the Dirty Dozen aims to protect taxpayers, businesses and the tax system from identity thieves and various hoaxes designed to steal money and information.

 

Beware of third-party promoters for the Fuel Tax Credit

Improper credits continue to be an important area of focus for the IRS. The fuel tax credit is meant for off-highway business and farming use and, as such, is not available to most taxpayers. However, unscrupulous tax return preparers and promoters are enticing taxpayers to inflate their refunds by erroneously claiming the credit. The IRS has seen an increase in the promotion of filing certain refundable credits using Form 4136, Credit for Federal Tax Paid on Fuels.

 

In this scam, a third party convinces a taxpayer to fraudulently claim the credit with promises of a windfall refund. But the promoters are focused on their own gain, taking advantage of the taxpayer with inflated fees, refund fraud and identity theft.

 

Taxpayers contemplating participating in any questionable tax scheme such as this should be aware the IRS has increased its compliance efforts related to falsely claiming these credits. IRS processing systems, including new identity theft screening filters, are now stopping a significant number of suspicious fuel tax credit refund claims.

 

Before taking the bait on a dubious credit claim, taxpayers should seek advice from a legitimate source. Returns filed by individuals and tax preparers who knowingly claim a credit to which they are not entitled may face fines and even be subject to federal criminal prosecution and imprisonment.

Help stop fraud and scams

As part of the Dirty Dozen awareness effort, the IRS encourages people to report individuals who promote improper and abusive tax schemes as well as tax return preparers who deliberately prepare improper returns.

 

To report an abusive tax scheme or a tax return preparer, people should mail or fax a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:

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

 

Alternatively, taxpayers and tax practitioners may send the information to the IRS Whistleblower Office for possible monetary reward. For more information, see Abusive Tax Schemes and Abusive Tax Return Preparers.