IRS Dirty Dozen: The Truth About the “Self-Employment Tax Credit” Scam

Introduction 

The IRS released its annual “Dirty Dozen” list, highlighting the most dangerous tax scams taxpayers need to avoid. One of the biggest threats circulating right now is the so-called self-employment tax credit. Social media promoters are marketing it as an easy way for self-employed individuals and gig workers to receive up to $32,000 in COVID-related payments. But here’s the reality: this widely advertised credit is misleading, and filing for it without proper eligibility can put you directly in the IRS’s crosshairs. Let’s break down what’s really going on.

https://www.youtube.com/watch?v=e6upoLpwfHM

What the IRS Dirty Dozen Means

Each year, the IRS publishes a list of the top tax scams affecting taxpayers. These scams often spread quickly through social media, email marketing, and aggressive promoters. The IRS specifically warns taxpayers to verify information directly from IRS.gov and ensure the website ends in “.gov” to avoid fraudulent sources.

The “Self-Employment Tax Credit” Myth

Despite what you may be hearing online, there is no broad “self-employment tax credit” that automatically pays up to $32,000. The credit being referenced is actually a much more limited and technical provision called the Credits for Sick Leave and Family Leave. Many taxpayers simply do not qualify.

Promoters are using misleading language, similar to what we saw with the Employee Retention Credit, to convince self-employed individuals that they’re entitled to large payments when they are not. This misinformation is causing taxpayers to file inaccurate claims.

IRS Scrutiny and Audit Risk

The IRS has made it clear that claims filed under this provision are being closely reviewed. When the IRS states that “taxpayers filing this claim do so at their own risk,” that’s a strong warning. In practical terms, it means:

• Your return may trigger additional identity verification requests.

• You may receive IRS correspondence asking for documentation.

• Your return could ultimately be examined (audited).

  
  

In other words, this is a red-flag area. Filing a questionable credit could result in years of back-and-forth with the IRS.

Know Your Effective Tax Rate

As a general benchmark, most taxpayers have an effective tax rate between 10% and 20%. You can calculate this by dividing your total tax liability by your total income. If your rate falls far outside that range, it’s worth reviewing your return carefully. Any reputable tax preparer should be able to walk you through your return page by page and clearly explain every credit and deduction.

If you see large credits labeled as “self-employment tax credits” or substantial COVID-related payments, that should prompt additional questions.

Work With an Ethical Tax Professional

A qualified tax professional will absolutely take every credit and deduction you’re legally entitled to, but they will not fabricate eligibility. Filing a falsified return exposes you to penalties, interest, audits, and potentially severe consequences.

Sometimes, it’s less expensive in the long run to simply pay your fair share of taxes rather than fighting an audit for years.

Conclusion 

The promise of a large COVID-related payout may sound appealing, especially for self-employed builders and business owners. But the so-called “self-employment tax credit” being promoted online is largely misunderstood and frequently misapplied. The IRS is actively reviewing these claims, and filing incorrectly could trigger an audit.

Before claiming any credit, make sure you truly qualify and fully understand the rules. If you’re unsure, work with a trusted, experienced tax professional who will protect your business, not expose it to unnecessary risk. 

For more insights on the IRS Dirty Dozen and other tax pitfalls, watch our latest video where Jon Markee, your Builder CPA, breaks it down in detail.