IRS
The Internal Revenue Service today warned taxpayers not to fall victim to a new emerging scam involving buying clean energy tax credits.
In this latest scam, the IRS is seeing instances where unscrupulous tax return preparers are misrepresenting the rules for claiming clean energy tax credits under the Inflation Reduction Act (IRA).
The transferability provisions of the IRA enable the purchase of eligible federal income tax credits from investments in clean energy to offset a buyer’s tax liability. The IRS has seen taxpayers file returns using unscrupulous return preparers who are claiming purchased clean energy credits that the taxpayer is ultimately unable to benefit from.
The scam is generally targeting individuals who file Form 1040. The preparers file returns that have individuals improperly claiming IRA credits that offset income tax from sources such as wages, Social Security and retirement account withdrawals.
Individuals purchasing tax credits under the IRA are subject to the passive activity rules for any purchased credits. Generally, this means they can only use purchased credits to offset income tax from a passive activity. Most taxpayers do not have passive income and a passive income tax liability. Most investment activities are not considered passive.
“This is another example where scammers are trying to use the complexity of the tax law to entice people…
