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IRS assesses $162 million in penalties over false tax credit claims tied to social media

9/10/2025

It's never a good idea to take tax advice from social media. Scam artists often promote tax credits and claims for fraudulent refunds. They promise easy and fast refunds. Taxpayers following this advice end up with large tax penalties for filing these frivolous claims instead of the refunds they hoped for. On average, these taxpayers are each billed $5,062.50 in penalties for making fraudulent claims on their tax returns.

The IRS recently assessed $162 million dollars to taxpayers for filing fraudulent fuel tax credit and Sick and Family Leave Credits after bad actors posing as tax experts on social media encouraged thousands of taxpayers to file inaccurate or frivolous returns by falsely claiming that all taxpayers are eligible for credits they do not actually qualify for.

“These schemes are not only misleading but can cost taxpayers dearly,” said James Clifford, IRS Director Return Integrity and Compliance Services. “People who follow this advice could end up with rejected claims and a penalty of up to $5,000 in addition to any other penalties that might apply. So far, the IRS has imposed over 32,000 penalties costing taxpayers more than $162 million.”

IRS news release IR-2025-90 dated Sept. 8, 2025 provides for some common traits to look out for in these scams:

Social media posts that claim everyone qualifies for certain tax credits.
Promises of “easy” or “fast” refund with minimal documentation.
Instructions to file amended returns, even if you did not originally qualify for the credits.
Encouragement to ignore IRS letters or respond with false information.

The bottom line is that there is a fine line between a great opportunity and something that is too good to be true. When in doubt, give us a call. A good accountant is not the one who gets you the largest refund. It's the one who reports all your income and provides you with all the legitimate tax credits and deductions that you qualify for in a solid tax return that will stand up to IRS scrutiny.

For more information see IRS News Release IR-2025-9.

Out-of-pocket classroom costs could be offset with Educator Expense Deduction

8/20/2025

It’s back to school season, and with that comes potential out-of-pockets costs for educators. The Educator Expense Deduction lets eligible teachers and administrators deduct certain expenses from their taxes.

Eligible educators
The taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide and work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

About this deduction
Educators can deduct up to $300 of certain trade or business expenses that weren't reimbursed by their employer, grant or other source. If two married educators are filing a joint return, the limit rises to $600. These taxpayers can't deduct more than $300 each.
Qualified expenses are amounts the taxpayer paid themselves during the tax year.
Some of the expenses an educator can deduct include:

Professional development course fees
Books and supplies
Computer equipment, including related software and services
Other equipment and materials used in the classroom

Source: Issue Number: Tax Tip 2025-58

Deduction for Seniors Touted as "No Tax on Social Security" Good, but Misleading

7/25/2025

New deduction: Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000. This new deduction is in addition to the current additional standard deduction for seniors under existing law.
- The $6,000 senior deduction is per eligible individual (i.e., $12,000 total for a married couple where both spouses qualify).
- Deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
Qualifying taxpayers: To qualify for the additional deduction, a taxpayer must attain age 65 on or before the last day of the taxable year.
Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
- Taxpayers must:
  - include the Social Security Number of the qualifying individual(s) on the return, and
  - file jointly if married, to claim the deduction.

NOTE: Up to 85% of Social Security Benefits remain taxable as they have been in the past. That is something the One Big Beautiful Bill could not change. Instead, the new Senior Deduction of $6,000 is meant to offset most the tax on Social Security for most beneficiaries. Social Security must still be reported for tax purposes and the taxable amount will be combined with other income including interest, dividends, pension and IRA distributions to determine what tax bracket applies. The effect of the Senior Deduction is an 'overall' additional $6,000 on top of the standard deduction for non-itemizers.

“No Tax on Car Loan Interest” Details Released by IRS

7/25/2025

New deduction: Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)
- Maximum annual deduction is $10,000.
- Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
Qualified interest: To qualify for the deduction, the interest must be paid on a loan that is:
- originated after December 31, 2024,
- used to purchase a vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify),
- for a personal use vehicle (not for business or commercial use) and
- secured by a lien on the vehicle.

If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.

Qualified vehicle: A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States.
Final assembly in the United States: The location of final assembly will be listed on the vehicle information label attached to each vehicle on a dealer's premises. Alternatively, taxpayers may rely on the vehicle’s plant of manufacture as reported in the vehicle identification number (VIN) to determine whether a vehicle has undergone final assembly in the United States.
- The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) provides plant of manufacture information. Taxpayers can follow the instructions on that website to determine if the vehicle’s plant of manufacture was located in the United States.
Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
- The taxpayer must include the Vehicle Identification Number (VIN) of the qualified vehicle on the tax return for any year in which the deduction is claimed.
Reporting: Lenders or other recipients of qualified interest must file information returns with the IRS and furnish statements to taxpayers showing the total amount of interest received during the taxable year.
Guidance: The IRS will provide transition relief for tax year 2025 for interest recipients subject to the new reporting requirements.

New “No Tax on Overtime” Details Released by IRS

7/25/2025

New deduction: Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” portion of “time-and-a-half” compensation -- that is required by the Fair Labor Standards Act (FLSA) and that is reported on a
- Form W-2, Form 1099, or other specified statement furnished to the individual.
- Maximum annual deduction is $12,500 ($25,000 for joint filers).
- Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
- Taxpayers must:
  - include their Social Security Number on the return and
  - file jointly if married, to claim the deduction.
Reporting: Employers and other payors are required to file information returns with the IRS (or SSA) and furnish statements to taxpayers showing the total amount of qualified overtime compensation paid during the year.
Guidance: The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and other payors subject to the new reporting requirements.

Note: Overtime is broken down into "time" (regular rate of pay) and a "half" (the extra amount received). Only the "half" amount received is eligible for the deduction. The "time" portion of overtime remains taxable.

New “No Tax on Tips” Details Released by IRS

7/25/2025

“No Tax on Tips”

New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.
- “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing.
- Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income (without regard to this deduction) from the trade or business in which the tips were earned.
- Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
- Self-employed individuals in a Specified Service Trade or Business (SSTB) under section 199A are not eligible. Employees whose employer is in an SSTB also are not eligible.
- Taxpayers must:
  - include their Social Security Number on the return and
  - file jointly if married, to claim the deduction.
Reporting: Employers and other payors must file information returns with the IRS (or SSA) and furnish statements to taxpayers showing certain cash tips received and the occupation of the tip recipient.
Guidance: By October 2, 2025, the IRS must publish a list of occupations that “customarily and regularly” received tips on or before December 31, 2024.
- The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payors subject to the new reporting requirements.

2025 Tax Law Changes Under the One Big Beautiful Bill

7/7/2025

The One Big Beautiful Bill was signed by President Trump on July 4, 2025. Here are some of the tax changes.

The State and Local Tax Deduction (SALT): Previously capped at $10,000. Now capped at $40,000 for 2025 for taxpayers with adjusted gross income of under $500,000. Those with income over that will have a limit that phases down, but no less than $10,000. Pass through entity (PTE) tax elections for partnerships and S-corporations are still allowed.

New Senior Deduction: An additional $6,000 per individual over 65 from 2025 to 2028. The deduction is reduced for those with adjusted gross income over $75,000 ($150,000 married filing joint).

No Tax on Tips: Temporary deduction for tax years 2025 – 2028 of up to $25,000 for qualified tips received by an individual in an occupation that customarily and regularly receives tips. Allowed in addition to the standard deduction. Deduction is limited for taxpayers with adjusted gross income over $150,000 ($300.000 if married filing joint.

No Tax on Overtime: Temporary deduction of up to $12,500 ($25,000 in the case of a joint return) for qualified overtime compensation received by an individual for tax years 2025 - 2028. Allowed in addition to the standard deduction. Deduction is limited for taxpayers with adjusted gross income over $150,000 ($300.000 if married filing joint).

Car Loan Interest: For the years 2025 through 2028, eligible buyers may deduct up to $10,000 of interest paid on new auto loans if the vehicle is assembled in the U.S. The deduction will be reduced and phase out for taxpayers with income more than $100,000 ($200,000 if married taxpayers filing jointly).

Child Tax Credit: Increases to $2,200 for 2025. $1,400 is refundable if credit exceeds taxable income.

Qualified Business Income Deduction: Remains at 20% but is now a permanent deduction. It was previously set to expire.

Estate Tax Exemption: Increased to $15 million ($30 million married filing joint)

Itemized Deduction Limitation: Now reduced by 2/37th of the higher of itemized deductions or taxable income that exceeds the start of the 37% tax bracket. For most people the reduction amounts to $740 per $10,000 of itemized deductions.

Employee Bicycle Commuting Reimbursements Taxable: The bill permanently excludes qualified bicycle commuting reimbursements from the list of qualified transportation fringe and other commuting benefits, making them taxable to employees.

Moving Expense Deduction: Permanently eliminates deduction for moving expenses, except for members of the armed forces and certain members of the intelligence community.

Gambling losses: Now limited to 90% of the loss amount. Losses are deductible as an itemized deduction only to the extent of gains from gambling during the tax year.

Student Loan Debt Discharge: The bill makes permanent the exclusion from gross income student loans that are discharged on account of death or disability.

Trump Accounts: Tax-free savings accounts for minors, called Trump accounts, a form of individual retirement account (IRA) for the exclusive benefit of individuals under 18. Contributions up to $5,000/yr. can be made in calendar years before the beneficiary turns 18 and distributions with tax free earnings can be made starting in the calendar year the beneficiary turns 18. Employers may contribute to employee accounts. The employee is not taxed on these contributions. A contribution pilot program provides a $1,000 tax credit for opening a Trump account for a child born between Jan. 1, 2025, and Dec. 31, 2028. The bill appropriates $410 million, to remain available through Sept. 30, 2034, to fund Trump accounts.

New Charitable Contribution Deduction: A new deduction of up to $1,000 for single filers or $2,000 for married taxpayers filing jointly for cash charitable contributions. Not required to itemize deductions. May claim in addition to the standard deduction. Personal contributions are reduced by 0.5% of the actual contributions. Corporate contributions are reduced by 1% of the corporation’s taxable income and may not exceed10% of taxable income.

Contributions to Scholarship-Granting Organizations: Allows a credit of the greater of $5,000 or 10% of adjusted gross income for charitable contributions to scholarship-granting organizations. Caveat: The credit comes with a $4 billion annual cap (starting in 2027), and the credit will be allocated on a first-come, first-served basis, up to that cap.

Energy Credits: Discontinued for Federal (State may still allow these credits) as follows:
• Energy-efficient home improvement credit and residential clean energy credit (the solar credits) terminates after Dec. 31, 2025
• Previously owned clean vehicle credit terminates after Sept. 30, 2025
• Clean vehicle credit terminates for vehicles acquired after Sept. 30, 2025
• Qualified commercial clean vehicle credit terminates after Sept. 30, 2025
• Alternative fuel vehicle refueling credit terminates after June 30, 2026
• Energy-efficient commercial buildings deduction terminates for property the construction of which begins after June 30, 2026
• New energy-efficient home credit terminates after June 30, 2026

Bonus Depreciation: Permanently extends the bonus depreciation deduction, allowing a deduction of 100% of property acquired and placed in service on or after January 19, 2025.

Paid Family and Medical Leave Credit: Previously set to expire, is now a permanent credit for employers.

Form 1099 Reporting Threshold: Increases the information-reporting threshold to $2,000 in a calendar year (from $600).

Third-party Network Transaction 1099-K Reporting Threshold: Previously scheduled to be reduced to $600, the annual reporting threshold reverts to $20,000 and or 200 transactions.

Disclaimer: The above information does not represent the full Bill and may be subject to change and interpretation. The State of Hawaii may or may not follow these changes.

BOI Reporting Deadline Extended to January 13, 2025 for Most Reporting Companies

12/24/2024

In light of a December 23, 2024, federal Court of Appeals decision, reporting companies, except as indicated below, are once again required to file beneficial ownership information with FinCEN. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline as follows:

Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.)
Reporting companies created or registered in the United States on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN.
Reporting companies created or registered in the United States on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later.
Reporting companies that are created or registered in the United States on or after January 1, 2025 have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.

As indicated in the alert titled “Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)”, Plaintiffs in National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)—namely, Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024)—are not currently required to report their beneficial ownership information to FinCEN at this time.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction enjoining the Corporate Transparency Act (CTA) entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. Texas Top Cop Shop is only one of several cases that have challenged the CTA pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought of stay of the injunction pending that appeal with the district court and the U.S. Court of Appeals for the Fifth Circuit.

Citation Source: www.fincen.gov/boi

IRS Raises Standard Mileage Rate to 70 Cents Per Mile in 2025

12/19/2024

The Internal Revenue Service today announced that the optional standard mileage rate for automobiles driven for business will increase by 3 cents in 2025, while the mileage rates for vehicles used for other purposes will remain unchanged from 2024.

Beginning Jan. 1, 2025, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

70 cents per mile driven for business use, up 3 cents from 2024.
21 cents per mile driven for medical purposes, the same as in 2024.
21 cents per mile driven for moving purposes for qualified active-duty members of the Armed Forces, unchanged from last year.
14 cents per mile driven in service of charitable organizations, equal to the rate in 2024.

ALERT: IRS warns taxpayers about misleading claims about non-existent “Self Employment Tax Credit;” promoters, social media peddling inaccurate eligibility suggestions

7/15/2024

Taxpayers urged to talk to a trusted tax professional, not rely on marketers or social media for tax advice

IR-2024-187, July 15, 2024

WASHINGTON — The Internal Revenue Service issued a consumer alert today following bad advice circulating on social media about a non-existent “Self Employment Tax Credit” that’s misleading taxpayers into filing false claims.

Promoters and social media are marketing something they describe as the “Self Employment Tax Credit” as a way for self-employed people and gig workers to get big payments for the COVID-19 pandemic period. Similar to misleading marketing around the Employee Retention Credit, there is inaccurate information suggesting many people qualify for the tax credit and payments of up to $32,000 when they actually do not.

In reality, the underlying credit being referred to in social media isn’t called the “Self Employment Tax Credit,” it’s a much more limited and technical credit called Credits for Sick Leave and Family Leave. Many people simply do not qualify for this credit, and the IRS is closely reviewing claims coming in under this provision so people filing claims do so at their own risk.

“This is another misleading social media claim that’s fooling well-meaning taxpayers into thinking they’re due a big payday,” said IRS Commissioner Danny Werfel. “People shouldn’t be misled by outlandish claims they see on social media. 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.”

People who were self-employed can claim Credits for Sick and Family Leave only for limited COVID-19 related circumstances in 2020 and 2021; the credit is not available for 2023 tax returns. The IRS is seeing repeated instances where taxpayers are incorrectly using Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to incorrectly claim a credit based on income earned as an employee and not as a self-employed individual.

To qualify for the Sick and Family Leave Credits, self-employed workers have to meet a variety of technical reasons in 2020 and 2021 that didn’t allow them to work, including caring for an individual subject to a quarantine or isolation order. The IRS has a detailed set of FAQs describing the very technical requirements for meeting this provision of the law.

The IRS is seeing some similarities to marketing around this “Self Employment Tax Credit” similar to aggressive promotion of the Employee Retention Credit. Both are technical credits that have been mischaracterized by some as a way for average taxpayers to get a big government payment. In reality, these are very limited credits that have a variety of complex requirements before people can qualify.

The IRS urges people to check with a trusted tax professional before filing for any “Self Employment Tax Credit” or any other questionable tax claim circulating on social media.

The IRS has previously warned taxpayers about misuse of the Sick and Family Leave Credits stemming from various tax scams and inaccurate social media advice that led thousands of taxpayers to file inflated refund claims during the past tax season.

In addition to the Sick and Family Leave Credit, the IRS warned taxpayers not to fall for these scams centered around the Fuel Tax Credit and household employment taxes. The IRS has seen thousands of dubious claims come in where it appears taxpayers are claiming credits for which they are not eligible, leading to refunds being delayed and the need for taxpayers to show they have legitimate documentation to support these claims.

The IRS continues to urge taxpayers to avoid these scams as myths continue to persist that these are ways to obtain a huge refund. Many of these scams were highlighted during this spring’s annual Dirty Dozen series, including the Fuel Tax Credit scam, bad social media advice and “ghost preparers.”

“These improper claims have been fueled by social media and people sharing bad advice,” Werfel said. “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. All of these scams illustrate that it’s important to carefully review the tax return for accuracy before filing and rely on the advice of a trusted tax professional, not someone trying to make a quick buck or a questionable source on social media.”

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