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IRS Warns of Dangerous New Tax Scam Involving W-2 Forms

"We worry that innocent taxpayers could be at risk of being tempted into falling into a trap," said Acting IRS Commissioner Doug O'Donnell.

W-2 forms with US money
A get-rich-quick scheme on social media is encouraging taxpayers to manually fill out a W-2 form with fictional income.
Darylann Elmi/Getty Images

This story is part of Taxes 2023, CNET's coverage of the best tax software, tax tips and everything else you need to file your return and track your refund.

The IRS is warning the public about new tax scams this season, including one encouraging people to defraud the government.

There was more than $5.7 billion in tax fraud in 2022 alone, the IRS said, and illicit schemes are already proliferating in 2023. 

One popping up on social media tells people to manually fill out a W-2 form with false income information in order to score a large refund.

According to a March 3 IRS bulletin, filers are encouraged to invent large incomes and withholding figures, make up a fictional employer and submit a return electronically in hopes of getting as much as five figures back from Uncle Sam.

One version of the ploy is directed at self-employed people who have claimed credits for sick leave or family leave using Form 7202. The fraudster urges them to claim a credit based on income earned as a salaried employee, not as someone who's self-employed. (These credits were available for 2020 and 2021 returns to help those impacted by COVID-19, but are no longer applicable.)

Read on: How to Track Your 2022 Tax Return

Another variation tells people to make up household workers and try to claim a refund based on sick leave and family wages they never paid out, using a Schedule H (Form 1040).

"We worry that innocent taxpayers could be at risk of being tempted into falling into a trap that puts them at risk of financial and criminal penalties," Acting IRS Commissioner Doug O'Donnell said in a statement. 

At the very least, the agency said, submitting false tax paperwork can result in a $5,000 fine for a frivolous tax return penalty. But there is also the risk of criminal prosecution.

"People should not make up income and try to submit a fraudulent tax return in hopes of getting a huge refund," O'Donnell said. "There is no secret way to get free money."