IRS Self Employment Tax Credit: Who qualifies for self-employed tax credit?
The IRS issued a consumer alert today regarding misleading advice circulating on social media about a supposed “Self Employment Tax Credit” that’s prompting taxpayers to file false claims. This misleading information suggests that self-employed individuals and gig workers can receive substantial payments for the COVID-19 pandemic period, with some claims suggesting amounts up to $32,000.
In reality, the credit being referred to is not called the “Self Employment Tax Credit” but rather the Credits for Sick Leave and Family Leave. This credit was available for specific circumstances in 2020 and 2021 and is not applicable to 2023 tax returns. Many people are mistakenly using Form 7202, intended for self-employed individuals who couldn’t work due to COVID-19, to claim a credit for income earned as employees, which is incorrect.
IRS Commissioner Danny Werfel warned about the dangers of such misinformation: “This is another misleading social media claim that’s fooling well-meaning taxpayers into thinking they’re due a big payday.” He urged: “Before paying someone to file these claims, taxpayers should consult with a trusted tax professional to see if they meet the very limited eligibility scenarios.”
The IRS has observed a pattern of misleading marketing similar to that seen with the Employee Retention Credit, which has also been mischaracterized. Both credits have complex requirements and are not intended for general taxpayer claims. The IRS continues to see a rise in dubious claims, causing delays in refunds and requiring additional documentation.
IRS warns of fake “self employment tax credit” scam
The alert also extends to other scams, including those related to the Fuel Tax Credit and household employment taxes. The IRS has highlighted these issues in its annual Dirty Dozen series, emphasizing the importance of verifying the legitimacy of tax claims.
Werfel reiterated the importance of seeking accurate advice, noting: “Scam artists constantly prey on people’s hopes and try to use the complexity of the tax system to convince people there are secret ways to get a big refund.” He advises taxpayers to consult with qualified professionals to navigate the complexities of tax credits and avoid falling for scams.
As tax season approaches, it’s crucial for taxpayers to remain vigilant and verify information through reliable sources to manage their financial responsibilities effectively.