IRS Dirty Dozen: The Sick Leave and Family Leave Credit Scam
- Jon
- 9 hours ago
- 2 min read
Introduction
The IRS “Dirty Dozen” is a list of the most dangerous and common tax scams taxpayers should watch out for each year. In this installment of the series, Jon Markee, your Builder CPA, highlights a growing issue involving the Sick Leave and Family Leave Credit. While this credit was legitimate during the height of the pandemic, it is now being improperly claimed by taxpayers who no longer qualify for it. Understanding how this scam works can protect you from serious consequences.
What Is the Sick Leave and Family Leave Credit?
The Sick Leave and Family Leave Credit was a specialized tax credit available to self-employed individuals during 2020 and 2021 as part of pandemic relief efforts. It was designed to help those who were unable to work due to COVID-related illness or caregiving responsibilities.
However, this credit is not available for later tax years. Despite that, the IRS is seeing repeated instances of taxpayers improperly claiming this credit using Form 7202.
Incorrect Use of Form 7202
One of the most common issues involves taxpayers incorrectly claiming the credit based on income earned as an employee, rather than as a self-employed individual. The credit was specifically intended for self-employed individuals, not W-2 employees.
In some cases, less experienced or unethical tax preparers may allow or even encourage these claims to increase a client’s refund. This is a serious red flag.
Pandemic Credits Are Mostly Gone
Many COVID-related credits and benefits have expired. If you find yourself attempting to claim a pandemic-related credit today, chances are it no longer applies.
Scammers and misleading social media videos may suggest these credits are still widely available. They are not. Falling for these tactics can result in audits, penalties, and repayment of improperly received refunds.
Review Your Tax Return Carefully
Even if you hire a professional to prepare your taxes, you are ultimately responsible for what gets filed under your name.
You should:
Review your tax return page by page.
Look for unfamiliar credits or forms.
Question any mention of sick leave or family leave credits if you did not qualify.
Avoid pressuring your preparer to achieve a specific refund amount.
If a refund seems too good to be true, it probably is. Unethical preparers may try to meet a refund expectation even if it requires bending the rules, and that liability ultimately falls on you.
The Consequences of Fraudulent Claims
Improperly claiming expired or ineligible credits can result in:
IRS audits
Repayment of the refund
Penalties and interest
Potential fraud investigations
The short-term gain is not worth the long-term risk.
Conclusion
The Sick Leave and Family Leave Credit served an important purpose during the pandemic, but it is no longer available for current tax years. Be cautious of anyone encouraging you to claim outdated COVID-related credits, and always verify information directly from official IRS.gov sources.
Staying informed and reviewing your tax return carefully can protect you from becoming a victim of the latest IRS Dirty Dozen scam. For more insights, watch our latest video where Jon Markee, your Builder CPA, breaks this down in detail.
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