IRS Issues Warning on Clean Energy Tax Credit Scam, IR-2024-182

The IRS has issued a cautionary alert to taxpayers about a new scam exploiting clean energy tax credits. This emerging fraud involves deceitful tax preparers misrepresenting the rules for claiming clean energy tax credits as outlined in the Inflation Reduction Act (IRA).

The IRS has identified cases where tax returns prepared by unscrupulous individuals claim ineligible clean energy credits, misleading taxpayers into believing they can offset tax liabilities. Particularly affected are those filing Form 1040, who find their returns manipulated to improperly claim credits against income tax from wages, Social Security, and retirement withdrawals. Commissioner Danny Werfel highlighted the issue, stating, “Scammers are capitalizing on the complexity of tax laws, enticing taxpayers to claim illegitimate credits. “He urged taxpayers to consult reputable tax professionals when dealing with complex credits like those for clean energy.

Under the IRA, purchased clean energy credits are subject to passive activity rules, typically restricting their use to offsetting tax from passive income. Most taxpayers, lacking passive income, are ineligible for these credits, risking future IRS compliance actions and potential penalties. Taxpayers should verify their eligibility with trusted advisors before purchasing and claiming clean energy credits. More information is available on the Inflation Reduction Act page on the IRS website.

The IRS also cautioned against other prevalent scams, including those involving the Fuel Tax Credit and Sick and Family Leave Credit. Taxpayers are encouraged to report any fraudulent schemes or preparers using Form 14242.