Promoters are pushing outdated or improper tax credit claims. Know the facts before your refund gets frozen or worse.
Welcome back to our tour through the IRS’s 2025 Dirty Dozen Tax Scams. Now we’re tackling Misleading Sick and Family Leave Credit Claims, a scam born during the pandemic and still lingering like a bad cough.
What Is This Credit, Really?
During COVID-19, the IRS allowed self-employed individuals to claim a tax credit if they couldn’t work due to illness, quarantine, or caregiving responsibilities. The credit was claimed using Form 7202, and it applied only to the 2020 and 2021 tax years. That window has closed.
How the Scam Works
In this one, scammers or misinformed promoters encourage people to file for the credit, regardless of eligibility. In some cases, people are coached to list fake household employees on Schedule H and claim credits for made-up sick leave.
The scammers’ promise: A fat refund.
The taxpayers’ reality: A frozen refund, scary IRS letters, and penalties up to $5,000 per return.
Why the IRS Is Watching Closely
- Some taxpayers were duped into filing false claims and are now dealing with audit letters and delayed refunds.
- Form 7202 is being misused by people who didn’t qualify—and the IRS is flagging those returns for review.
- Claims beyond 2021 or for made-up wages are a fast track to IRS scrutiny.
Red Flags to Watch For
- You’re told to file 7202 even though you’re not self-employed.
- The person preparing your return promises a huge refund without asking questions.
- You’re encouraged to fabricate income or employees to make the numbers work.
What You Should Do
If you filed a return claiming this credit and weren’t eligible:
- Don’t ignore IRS letters—respond promptly.
- Amend your return to remove the false credit.
- Work with a qualified tax professional to clean things up before penalties get worse.
Get Back on Track with Smith Patrick CPAs
If you need help untangling a questionable claim or want to make sure your return is accurate, Smith Patrick CPAs is here to help. Remember: file smart and stay one step ahead of the fraudsters.
More Information
If you have questions, contact us to discuss your situation.
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Benjamin Schweiss
Benjamin Schweiss is a Staff Accountant at Smith Patrick CPAs. He holds a Bachelor’s degree from the University of Missouri – Columbia and is currently pursuing a master’s in accounting. Benjamin brings experience from his previous career in corporate marketing at PepsiCo North America and aims to make accounting approachable while providing exceptional service.
About Smith Patrick CPAs
Smith Patrick CPAs is a boutique, St. Louis-based, CPA firm dedicated to providing personal guidance on taxes, investment advice and financial service to forward-thinking businesses and financially active individuals. For over 30 years, our firm has focused on providing excellent service to business owners and high-net worth families across the country. Investment Advisory Services are offered through Wealth Management, LLC, a Registered Investment Advisor.
