Each year, the IRS releases a list known as the “Dirty Dozen,” a collection of the most prevalent and dangerous tax scams that businesses should be aware of. This list sheds light on one of the most significant challenges in modern tax identity management: tax fraud. These fraud schemes are often highly sophisticated, carefully crafted to target small and large businesses alike, with the intent to steal sensitive financial data, manipulate business owners into falsely claiming tax credits or deductions and ultimately cause substantial financial damage.
Among the most notorious fraud schemes in the 2025 IRS Dirty Dozen are several related to fraudulent tax credits, which have become a key area of focus for scammers looking to exploit unsuspecting taxpayers. Understanding and recognizing these schemes is crucial for safeguarding your business from falling victim to costly and damaging fraud tactics.
False Fuel Tax Credit claims
The Fuel Tax Credit is designed for businesses involved in off-highway activities like farming or certain transportation industries, but it’s often misused. Unfortunately, business owners are being misled by dishonest tax preparers or social media influencers into claiming this credit when they don’t qualify. Make sure you meet the requirements before filing for the Fuel Tax Credit and always consult the IRS guidelines or a tax professional for clarification.
Incorrect sick and family leave claims
During the COVID-19 pandemic, self-employed individuals were eligible for sick and family leave credits under the American Rescue Plan. However, these credits are no longer available for tax years after 2021. Despite this, some fraudulent schemes continue to encourage small business owners to claim these credits, even though they are not entitled to them.
Bogus self-employment credits
One of the more aggressive scams in 2025 involves fraudsters promoting a non-existent “Self-Employment Tax Credit.” These scammers are targeting self-employed individuals, gig workers, and small business owners, promising tax credits of up to $32,000, supposedly related to the COVID-19 pandemic. However, this “credit” does not exist, and falling for this scam could lead to significant tax penalties.
Always verify the existence of any credit or deduction before including it in your tax filings. If someone offers you a tax credit that seems too good to be true, it probably is. Consult the IRS website or a certified tax professional for reliable information.
Overstated withholding
The overstated withholding scam is one of the more dangerous schemes that is now making its rounds. In this scam, fraudsters encourage small business owners to inflate the income and withholding amounts reported on tax forms such as W-2, 1099, or other income documents. The goal is to generate an inflated tax refund by falsely claiming higher withholding amounts than occurred.
In the case of fraud, the IRS will likely hold your refund pending verification, and you could be subject to penalties and interest for filing inaccurate returns. Always ensure that the income and withholding amounts reported on your tax forms are accurate, legitimate, and verifiable. Filing fraudulent returns can delay your refund and put your business at risk of audits.
How to Report Suspected Tax Fraud
If your business has been targeted by any of these scams, or if you suspect that a tax preparer is engaging in fraudulent practices, it’s crucial to report it. The IRS provides a mechanism for reporting abusive tax schemes and return preparers through Form 14242. Reporting these schemes helps protect other businesses from falling victim to the same fraudsters and ensures that those responsible are held accountable.
Strengthening Fraud Prevention with Advanced Screening
Beyond the Dirty Dozen, businesses should always remain vigilant against other abusive tax avoidance schemes, including fraudulent trust arrangements, offshore tax evasion schemes and other deceptive strategies. At Sovos, we understand the pervasive challenge of tax fraud. While fraudsters are constantly finding new ways to exploit weaknesses in tax reporting systems, we help keep businesses protected year-round with TINCheck.
TINCheck acts as a first line of defense against fraud, leveraging real-time data validation and advanced screening techniques to detect and prevent fraudulent activity before it impacts your business.
Click here to learn more about our TIN matching services or get started today.