Trick or Treat? Watch Out for Tax Credit Scams
The IRS warns about fake tax credits, a nonexistent self-employment credit, and misuse of the Fuel Tax Credit. Learn the red flags to share with clients.
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- IRS source: Trick or treat? Don’t get tricked by tax credit scammers
On October 29, 2026, the IRS issued Tax Tip 2026-78 to warn taxpayers about scammers who use misleading information about tax credits. The goal is to convince people they qualify when they do not. Incorrect or false claims can lead to penalties, so it helps to know the warning signs before a client files.
Fake credits
Scammers have recently been promoting and selling credits called "Tribal Tax Credits" or "Native American Tax Credits." The IRS says these credits are fake and do not exist. Promoters encourage people to buy them in order to falsely reduce their tax liability or to generate large refunds.
The "self-employment tax credit" that does not exist
The IRS also warns about a broad "self-employment tax credit." There is no single self-employment tax credit. Self-employed people may qualify for certain credits, but eligibility depends on the specific rules for each credit, not on a social media post.
The IRS recommends relying on trusted sources, such as Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C), and qualified tax professionals when deciding whether a credit applies.
Misuse of the Fuel Tax Credit
Scammers may also encourage taxpayers to claim the Fuel Tax Credit. The IRS says most taxpayers are not eligible. The credit is generally available to business owners who meet certain requirements, such as non-taxable off-highway business use. Clients who run a business should be asked directly how they use fuel before this credit comes up.
Red flags to watch for
The IRS lists these warning signs of an abusive scheme. They apply to taxpayers, businesses, tribal communities, and tax professionals:
- Promises of larger refunds or tax savings
- Offers to buy tax credits for substantially less than their value
- Claims that only a limited number of credits are available, or that taxpayers must act fast
- References to government or interagency agreements that are not publicly available
- Legal opinions that cannot be verified directly with the attorney or law firm named
- Requests to sign a nondisclosure agreement before receiving basic information about the credit
- Misleading information on social media that promotes fake credits or misuse of a real credit
What to tell clients
If a client mentions a credit they heard about online or from a promoter, treat it as a question to verify, not a reason to claim it. Check eligibility against IRS publications and, when the situation is unclear, consult a qualified tax professional. A credit that sounds too good to be true, or one that comes with urgent pressure, is a warning sign under the IRS list above.
How to report a scam
Taxpayers who have information about tax fraud or other illegal tax-related activity can report it at IRS.gov/submitatip. More information about common tax schemes and scams is available on the Tax Scams page at IRS.gov.
This article summarizes IRS Tax Tip 2026-78. Read the full tip on IRS.gov before relying on it for a client's return.
Informational only, based on the IRS source linked above; not tax or legal advice for a specific situation.