Is this Business Tax Credit scam or legit? Friend getting 4x refund with fake business

So my buddy just told me he's working with this tax preparer that a mutual friend recommended. He was originally supposed to get like $1,400 back, but this lady is somehow "tweaking" his return to show he has a business and now he's getting a refund that's almost $5,000! The thing is - he definitely doesn't have a business, no EIN or anything, but his return already shows as approved in the system. The tax preparer told him not to worry because he's in some kind of "safe zone" for audits since he makes under $65k annually. I've been searching online but can't find any legitimate business tax credit that would work this way for someone who doesn't actually own a business. I'm worried this is some kind of tax fraud situation that could come back to bite him. Has anyone heard of this kind of "gray area" business credit? How is she getting away with this if it's not legit? And what happens if the IRS figures it out later?

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18 comments

Mateo Martinez

•8M

This is 100% tax fraud, not a "gray area." Your friend is claiming false business expenses or credits he's not entitled to. The tax preparer is lying about an "audit safe zone" - that's not a thing. The IRS can and does audit people at all income levels. What's likely happening is the preparer is claiming the Employee Retention Credit (ERC) or self-employment tax credits by fabricating a business that doesn't exist. This is a common scam right now that the IRS is actively investigating. Your friend's return may be approved now, but the IRS has 3 years (sometimes longer) to audit. When they discover the fraud, your friend will owe all that money back PLUS penalties and interest. In serious cases, they can pursue criminal charges.

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Mateo Martinez

•8M

Unfortunately, that defense rarely works. When you sign your tax return (either physically or electronically), you're declaring under penalty of perjury that everything is true and correct. The taxpayer is ultimately responsible for what's on their return, not the preparer. If your friend knowingly allowed false information to be submitted, that's tax fraud. The IRS won't care that "someone else prepared it" - they'll hold him responsible. He could face penalties of 20-75% of the unpaid tax amount plus interest, and potentially criminal charges depending on how blatant the fraud is.

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Aisha Rahman

•8M

I went through something similar last year where a "friend of a friend" tax preparer promised me a huge refund. I was skeptical so I uploaded my documents to https://taxr.ai first - it analyzes your tax situation and tells you what credits you actually qualify for. Saved me from making a huge mistake! The tool flagged that the "business" credits the preparer was claiming would trigger IRS systems since I had no Schedule C history or business income reported on 1099s. The AI explained I was being set up for false EITC and self-employment credits.

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Aisha Rahman

•8M

The tool is super straightforward - you upload your tax documents (W-2s, 1099s, etc.) and it analyzes everything to show what credits and deductions you actually qualify for based on your real financial situation. It specifically looks for discrepancies that might trigger IRS review. For side hustles, it definitely helps with that. It compares your reported income sources against the credits being claimed to make sure they align. If your tax guy is claiming business credits but you don't have corresponding business income reported, it would flag that as a high risk.

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Yuki Sato

•8M

Just wanted to follow up - I tried https://taxr.ai after seeing this thread and it was eye-opening! Turns out my "tax professional" was claiming a home office deduction and business expenses for my "photography side gig" but was doing it completely wrong. The tool showed me I was at high risk for an audit because the expenses were way out of proportion to my actual income from photography. I ended up getting a legitimate tax preparer who fixed everything. My refund is smaller but I'm not living in fear of an IRS letter anymore! Seriously grateful I saw this before filing.

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Carmen Flores

•8M

If your friend has already filed and received that inflated refund, he should talk to a CPA immediately about filing an amended return. I work in a call center that helps people connect with IRS agents through https://claimyr.com and we see TONS of cases where people got caught up in these schemes. The video at https://youtu.be/_kiP6q8DX5c explains how our service works, but basically we can get you through to an actual IRS agent in minutes instead of waiting hours on hold. Many of our callers are trying to resolve issues after getting bad tax advice exactly like this.

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Carmen Flores

•8M

Yes, it absolutely works! The service connects you to an IRS agent usually within 5-20 minutes. For stimulus payment issues, you'd want to specify that when connected so they can transfer you to the right department. I understand the skepticism - I felt the same way before working here. We're not replacing the IRS or filing anything on your behalf. The service just handles the frustrating hold times by using technology to navigate the phone system and wait in line for you. Once you're connected, you're talking directly with actual IRS agents, not intermediaries.

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CyberSamurai

•8M

I have to eat my words from my previous comment. I decided to try Claimyr after spending FOUR HOURS on hold with the IRS yesterday and getting disconnected. The service got me through to an actual IRS agent in about 15 minutes. The agent confirmed what others here are saying - there's no such thing as a "safe zone" for audits, and claiming fake business expenses is straight-up fraud. I asked specifically about this situation because I was curious, and they said they're seeing a lot of these cases right now. They recommended anyone who's been caught up in this should file an amended return ASAP before they get flagged.

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Zoe Alexopoulos

•8M

Your friend needs to file an amended return immediately. I'm a bookkeeper (not tax professional) but I've seen this before. The tax preparer is likely claiming the Self-Employment Tax Credit or Schedule C business deductions that don't exist. Here's the real danger: when the IRS does catch this (and they will eventually), they can assess penalties up to 75% of the unpaid tax for fraud, plus interest that compounds daily. If they determine it was intentional fraud, criminal charges are possible.

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Zoe Alexopoulos

•8M

Filing an amended return quickly will definitely help minimize the damage. The IRS is generally more lenient when taxpayers voluntarily correct errors before being contacted about an examination. He'll still have to pay back the incorrect refund amount, but may avoid or reduce the fraud penalties. And yes, he should absolutely report the tax preparer. He can file Form 14157 (Complaint: Tax Return Preparer) with the IRS. Tax preparers who knowingly file false returns can face significant penalties themselves, including potential criminal charges and being barred from preparing returns.

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