Bad Tax Advice on Social Media Costs Taxpayers Over $162 Million in IRS Penalties

Social media has become a fertile ground for misleading tax “hacks,” and the Internal Revenue Service (IRS) is sounding the alarm. More than $162 million in penalties have been assessed against taxpayers who filed false claims for tax credits promoted online.

What’s Going On?

Over the past few years, the IRS has observed a sharp rise in refund claims driven by social media posts encouraging taxpayers to claim credits they don’t qualify for. Many of these posts assert that essentially everyone is eligible — an assertion that simply isn’t true.

The most frequently misused credits in these scams include:

• Fuel Tax Credit — Intended for off-highway business or farm use, not general consumer use.

• Sick & Family Leave Credit — A pandemic-era provision with very limited applicability.

• Household Employment Tax Claims — Some taxpayers have claimed wages or leave benefits for fictitious household employees.

In many instances, promoters encourage taxpayers to file amended returns, sometimes even when they never originally claimed those credits. Others urge filers to ignore IRS notices or to respond with false assertions.

The Penalties Are Serious

These aren’t minor fines. In addition to having refund claims denied or delayed, taxpayers who file frivolous or false returns can face:

• A civil penalty up to $5,000 under Internal Revenue Code §6702 for submitting a frivolous return.

• Increased scrutiny from the IRS in future years.

• Possible audits or enforcement actions.

• Interest and other penalties tied to underpayment or misreporting of income.

To date, the IRS has assessed more than 32,000 penalties tied to these types of claims.

Why This Happens

These schemes often share common red flags:

• Claims that everyone qualifies for a given credit.

• Promises of “fast refunds” with little to no documentation.

• Encouragement to file amended returns without a valid reason.

• Suggestions to ignore or misrespond to IRS communications.

Social media offers a massive platform for influencers and promoters to spread slick, oversimplified “loophole” content — often without any tax credentials — and some content goes viral because it’s sensational, not accurate.

What You Can Do to Avoid Getting Burned

1. Verify any tax tip against credible sources. Always cross-check social media claims with information from the IRS or consult a licensed tax professional.

2. Be skeptical of “get rich quick” refund promises. If it sounds too good to be true, it likely is.

3. Don’t ignore IRS notices. Respond promptly and truthfully — supply documentation or amend returns as needed.

4. Check whether credits really apply to you. Many of the credits misused in these schemes are limited to specific conditions or tax years.

5. Report suspicious tax advice. If you see questionable posts or “tax hacks,” report them to the IRS or the Treasury Inspector General for Tax Administration (TIGTA).

The Rae’s Accounting Difference

At Rae’s Accounting, we believe your tax strategy should be based on facts, not Facebook. As Enrolled Agents, we’re federally licensed tax professionals authorized to represent you before the IRS. That means we don’t just prepare returns — we protect our clients with the knowledge, strategy, and integrity that social media “tax tips” can’t offer.

When it comes to your taxes, trust experience — not algorithms.

Rae’s Accounting — where real expertise meets year-round peace of mind.