The Internal Revenue Service (IRS) recently reminded taxpayers to be cautious of credit promoters and scammers who claim certain tax credits are available. Often these schemes promote large refunds or tax savings that are nonexistent.

Filing a return with incorrect or false tax credits could lead to penalties and other adverse tax consequences, including delays in processing. Taxpayers should review tax returns and eligibility for tax credits before signing a tax return.

The IRS recently highlighted scams involving so-called “Tribal Tax Credits” or “Native American Tax Credits.” According to the IRS, these credits do not exist. Promoters may encourage taxpayers to purchase these purported credits to reduce taxes owed or generate larger refunds, but doing so can lead to improper tax filings.

The IRS also warned taxpayers about promotions involving a broad “self-employment tax credit.” While some self-employed individuals may qualify for legitimate tax credits and deductions, there is no general self-employment tax credit available. Eligibility should be determined using official IRS guidance and reputable tax advisors rather than social media promotions.

In addition, the IRS emphasized that most taxpayers are ineligible for the Fuel Tax Credit. Scammers may encourage taxpayers to claim this credit even when they do not qualify. The Fuel Tax Credit is generally limited to certain business activities, including specific non-taxable off-highway business uses of fuel. Taxpayers should carefully review the requirements before making a claim.

Taxpayers and tax professionals should also be aware of some common red flags for tax scams, including:

• Promises of unusually large refunds or tax savings
• Offers to purchase tax credits at a significant discount
• Claims that taxpayers must act quickly because credits are available only for a limited time
• References to government agreements or programs that cannot be publicly verified
• Legal opinions that cannot be confirmed with the attorney or named law firm
• Requests to sign nondisclosure agreements (NDA) before receiving basic information
• Social media promotions encouraging taxpayers to claim credits without verifying eligibility

Taxpayers who become aware of tax fraud or other illegal tax-related activity can report the information directly to the IRS. The agency also encourages taxpayers to stay informed about emerging scams and review IRS resources regularly for updates on abusive tax schemes and fraudulent tax credit promotions.