The IRS has recently alerted taxpayers to a new scam surrounding the claiming of purchased clean energy tax credits, particularly for those filing Form 1040. This scam involves dishonest tax return preparers misleading taxpayers with regard to the rules for claiming these purchased credits under the Inflation Reduction Act (IRA). Such misinformation can be detrimental to taxpayers who unknowingly have claimed inappropriate credits, putting them at risk for future compliance action by the IRS.
These scammers exploit nuances in the tax code to mislead taxpayers into believing they can utilize these purchased credits against their income tax liability. However, the IRS notice highlights critical guidance to be aware of—the passive activity rules for purchased credits. These rules state that purchasing clean energy tax credits can only be used to offset passive income, such as rental income or income from limited partnerships. If you lack sufficient passive income, as many taxpayers do, you may not be able to realize, or fully realize, these credits in the current tax year. This can be delaying the financial benefits and potentially resulting in costly errors and penalties.
This warning underscores the importance of working with knowledgeable tax professionals who are well-versed in the specifics of these credits. By consulting with trusted advisors, you can ensure that you are claiming the credits you are entitled to and avoiding potential scams and subsequent penalties. The promise of easy credits can be tempting, but navigating the complexities with expert guidance is essential to maximize your benefits and remain compliant.
By staying informed and seeking professional advice, taxpayers can protect themselves from scams and ensure they benefit from clean energy tax credits correctly and compliantly.
