Scam Targeting Clean Energy Tax Credit

The IRS is warning taxpayers to be aware of a new scam involving buying clean energy tax credits. Dishonest tax return preparers have been misleading taxpayers on the requirements for claiming clean energy tax credits under the Inflation Reduction Act.

What You Need to Know

The Inflation Reduction Act includes transferability provisions that allow for the purchase of eligible federal income tax credits from investments in clean energy to offset a buyer’s tax liability. The IRS has seen cases arise where taxpayers are claiming purchased clean energy credits that they are unable to benefit from.

This scam targets 1040 filers, and this is how it works: a preparer files a return that improperly claims Inflation Reduction Act credits to offset income tax. Those who purchase Inflation Reduction Act credits are subject to passive activity rules; which means the purchased credits can only be used to offset passive income.

The IRS is advising taxpayers to be cautious of tax preparers marketing these types of credits. The IRS recommends consulting with reputable tax professionals before claiming credits like these. Claiming inappropriate credits can put taxpayers at risk for future compliance action. The taxpayer would be responsible for paying back the credit plus interest and penalties.

The IRS also warns against scams regarding the Fuel Tax Credit, the Sick and Family Leave Credit, and household employment taxes.

Report Fraud

To report an abusive tax scheme or a tax return preparer, use the online Form 14242 – Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed Form 14242 and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:
   Internal Revenue Service Lead Development Center
   Stop MS5040
   24000 Avila Road
   Laguna Niguel, California 92677 3405
   Fax: 877.477.9135

Taxpayers and tax professionals can also submit this information to the IRS Whistleblower Office, where they may be eligible for a monetary award.

Note: This information cannot take the place of advice from a lawyer. Each case is different and needs individual legal advice. You should contact the LITC or a private attorney if you need representation on a tax matter or if you have questions.

Source:

https://www.irs.gov/newsroom/irs-warns-of-new-scam-targeting-clean-energy-tax-credit