Tax season offers taxpayers many opportunities for savings. But it also brings out the scammers and fraudsters hoping cash in on unsuspecting filers, outdated credits and more.
Every year, the IRS releases its list of the “dirty dozen” scams impacting taxpayers and business owners. To protect your bank account, identity and reputation, see what’s new to the watchlist for 2025:
Expired sick leave and family leave credits. One of the most prevalent scams of 2025 involves Form 7202, “Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals.” Many taxpayers are still attempting to claim this credit despite it only being available for self-employed individuals for tax years 2020 and 2021. Continuing to claim it on your tax returns will trigger IRS scrutiny and potentially lead to penalties.
The self-employment tax credit. A bogus self-employment tax credit is circulating and misleading taxpayers into filing false claims. This misinformation is often a twisted reference to the expired sick leave and family leave credits mentioned above, suggesting that self-employed individuals and gig workers can collect payments of up to $32,000 for the COVID-19 period. If you see social media posts or receive emails promoting this false credit, be aware that it’s a scam.
Fraudulent household employment tax claims. The IRS reports a disturbing rise in suspicious Schedule H filings. This scheme involves the creation of fictional household employees — nannies, housekeepers or caregivers — to claim refunds based on wages never actually paid. The IRS has sophisticated methods to verify employment records and will flag any Schedule H filings that don’t match other documentation.
The overstated withholding scam. There’s also an uptick in taxpayers (or preparers) submitting returns with grossly exaggerated income and withholding amounts to generate artificially large refunds. The IRS has enhanced its detection systems for this particular scam and warns that such claims will be closely scrutinized. If discrepancies are found, refunds will be withheld, and guilty parties may face penalties or even criminal charges.
Remember, if a tax credit or deduction sounds too good to be true, it probably is. When in doubt, consult a certified tax professional. The experts at Magone & Company are available to answer any questions.
To get up to speed with other dirty dozen scams to watch out for, check out The IRS’ “Dirty Dozen” — What Tops This Year’s List? part 1 and part 2.
This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.