IRS Sounds Alarm: Clean Energy Tax Credit Scam Targets Taxpayers

The Internal Revenue Service (IRS) has issued a new warning about a scam involving clean energy tax credits under the Inflation Reduction Act (IRA). This scam targets individual taxpayers and could lead to serious financial losses.

The scam revolves around dishonest tax preparers who misrepresent the rules for claiming clean energy credits. They file tax returns incorrectly, claiming IRA credits to offset income tax from wages, Social Security, and retirement withdrawals.

However, these purchased credits can only legally offset income tax from passive activities.

IRS Commissioner Danny Werfel emphasized the danger of this scam. “Scammers are taking advantage of the complex tax laws,” he said. “Taxpayers should consult reputable professionals before claiming complicated credits like those for clean energy.”

The risks for taxpayers who fall victim to this scam are significant. To protect themselves, taxpayers should:

• Seek advice from trusted tax professionals about their eligibility for these credits.
• Understand the passive activity rules and other relevant parts of the tax code.
• Be cautious of claims influenced by social media or promoters that seem too good to be true.

The IRS provides more information on its website’s Inflation Reduction Act of 2022 page. It also warns about other ongoing scams involving fuel tax credits and household employment taxes.

For those who suspect fraud, the IRS encourages reporting. The IRS also notes that individuals reporting fraud might be eligible for monetary awards through their Whistleblower Office. 

By issuing this warning, the IRS hopes to prevent taxpayers from becoming victims and maintain the tax system’s integrity.