The IRS and the Coalition of Scam and Scheme Threats (CASST) have announced changes for the 2025 filing season to protect taxpayers from scams and schemes. The key issues highlighted in the news release include:

• Fuel Tax Credit Scams: A new form, “Statement Supporting Fuel Tax Credit (FTC) Computation - 1,” has been developed to combat the spread of misinformation surrounding the Fuel Tax Credit. This credit, intended for off-highway business and farming use, has been promoted on social media, misleading people into thinking they are eligible. The new statement requires taxpayers to provide detailed business information, including the type of machinery or vehicle for which the fuel was purchased and the relationship between the estimated and actual fuel costs. Those who improperly claim the credit will be subject to a $5,000 penalty for each return.
• Increased Review of “Other Withholding” Claims: The IRS is increasing its review of “Other Withholding” claims on Form 1040, Line 25C, which have been targeted by scammers. To avoid delays in processing, taxpayers are encouraged to attach supporting documentation for forms such as Form 1042-S, Form 8805, Form 8288-A, Form W2G, Form 8959, and Schedule K1.
• “Ghost Preparers”: The IRS is addressing the issue of “ghost preparers,” who do not sign tax returns or include their Preparer Tax Identification Number (PTIN). These preparers often mislead taxpayers into filing inaccurate returns and then disappear, leaving the taxpayer to face the consequences. The IRS will send letters to taxpayers whose returns appear to have been prepared by such individuals to educate them about the risks.
• Protection for Tax Professionals: The IRS is working to add more protections for tax professionals by safeguarding their electronic filing identification number (EFIN) and PTIN from unauthorized use.
• Misinformation on Social Media: The IRS and CASST anticipate that misinformation spread by influencers and scammers will intensify around the 2025 tax season. Taxpayers are urged to rely on trusted tax professionals instead of ill-informed social media advice.
• Reporting Scams: The IRS encourages the public to report improper and abusive tax schemes. This can be done by mailing or faxing Form 14242, as well as by reporting the information to the IRS Whistleblower Office for a possible monetary award. Scams may also be reported to the Treasury Inspector General for Tax Administration or the Internet Crime Complaint Center.

Fuel Tax Credit Filing Season Changes in Detail

To address the promotion of fraudulent Fuel Tax Credit claims, the IRS has taken several specific steps, including:

• New Fuel Tax Credit Statement: The IRS developed the “Statement Supporting Fuel Tax Credit (FTC) Computation - 1” to educate taxpayers on the eligibility requirements for claiming the credit. This form must be completed and attached to Form 1040 along with Form 4136.
• Who Must File: Individuals filing Form 1040 for the 2024 tax year who claim nontaxable use of gasoline, aviation gasoline, undyed diesel fuel, or undyed kerosene on Form 4136 must file the new statement.
• Required Information: The statement requires business information such as the business name and Employer Identification Number (EIN), if applicable, as well as the make, model, and type of machinery or vehicle for which the fuel was purchased. It also asks for a table comparing the estimated purchase price of the fuel to the actual cost and gallons reported on Form 4136. The IRS used information from the U.S. Energy Information Administration (EIA) to determine the average fuel price for the year.
• No Documentation with Return: Taxpayers should not include receipts or explanations with their tax return but should keep them with their records. They may be asked to submit proof of their actual fuel costs later.
• Penalties for Improper Claims: Claims and filings that are based upon a position identified as frivolous by the IRS or reflect a desire to delay or impede tax administration are subject to a $5,000 penalty under Internal Revenue Code (IRC) §6702(a) for each return claiming an improper credit. This penalty applies to each spouse on a married filing joint return.
• Targeted for Off-Highway Business and Farming Use: The Fuel Tax Credit is designed for off-highway business and farming use. Taxpayers must have a business purpose and qualifying business activity, like running a farm or purchasing aviation gasoline, to be eligible.
• Increased Scrutiny: The IRS is working to combat the spread of misinformation surrounding this credit, which has been promoted on social media. Most taxpayers do not qualify for this credit.

Other Withholding Filing Season Changes in Detail

To address issues with “other withholding” claims, the IRS is increasing its review of these claims on Line 25C of Form 1040. This measure is in response to the fact that these claims have become a target for scammers and schemers.

Here’s how the IRS is addressing this issue and what they suggest taxpayers do when filing:

• Increased Review: The IRS is stepping up its review of “Other Withholding” claims to protect taxpayers from fraudulent activity. This means that the IRS will be scrutinizing these claims more closely than in the past.
• Supporting Documentation: The IRS is encouraging taxpayers who are claiming “Other Withholding” to attach the necessary supporting documentation to their returns. This will help to reduce potential delays in verifying these claims.
  • Key Forms: The key forms that are associated with Line 25C include Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding), Form 8805 (Foreign Partner’s Information Statement of Section 1446 Withholding Tax), Form 8288-A (Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests), Form W2G (Certain Gambling Winnings), Form 8959 (Additional Medicare Tax), and Schedule K1 (Partner’s Share of Income, Deductions, Credits, etc.).
• Purpose: The IRS aims to protect taxpayers from scams and schemes by verifying the legitimacy of these claims. By increasing the review of “Other Withholding,” the IRS is trying to identify and prevent fraudulent claims.
• Reduced Delays: By attaching the appropriate supporting documentation, taxpayers can help the IRS verify their claims more quickly and potentially avoid delays in the processing of their returns.

In summary, the IRS is increasing scrutiny of “Other Withholding” claims and advises taxpayers to attach all relevant documentation to their returns when making such claims to avoid delays.

Actions Related to Ghost Preparers

The IRS is addressing the issue of “ghost preparers” through several measures. These preparers do not sign tax returns or include their Preparer Tax Identification Number (PTIN), which is a red flag that indicates a potential scam. Here’s how the IRS is tackling this issue:

• Increased Education: The IRS will send letters to taxpayers whose tax returns appear to have been completed by a paid tax preparer who did not sign the return or include their PTIN. These letters are intended to educate taxpayers about the risks associated with “ghost preparers”.
• Identification: The IRS is using these letters as a tool to help identify individuals who are being paid to prepare tax returns but are not properly identifying themselves on the returns.
• Highlighting Risks: The IRS is emphasizing that “ghost preparers” often mislead taxpayers into filing inaccurate returns to obtain bigger refunds, and then disappear, leaving the taxpayer to face the consequences of those inaccurate claims.
• Protection for Tax Professionals: The IRS is also working to protect legitimate tax professionals by safeguarding their electronic filing identification number (EFIN) and PTIN from unauthorized use, although details on this will be available in the future.
• Reporting: The IRS encourages the public to report “ghost preparers,” along with any other improper or abusive tax schemes. This can be done by mailing or faxing a completed Form 14242, “Report Suspected Abusive Tax Promotions or Preparers,” to the IRS Lead Development Center. Taxpayers and tax professionals may also report the information to the IRS Whistleblower Office for a possible monetary award. Scams may also be reported to the Treasury Inspector General for Tax Administration or the Internet Crime Complaint Center.

What is “CAAST”?

CASST is the Coalition of Scam and Scheme Threats, a task force that was convened at the request of IRS Commissioner Danny Werfel. It is a public-private partnership focused on combating scams and schemes in the tax system.

Here are some key details about CASST:

• Purpose: The primary goal of CASST is to protect taxpayers and tax professionals from scams and schemes. It also works to prevent tax professionals from having their credentials compromised.
• Members: The coalition is composed of federal and state tax agencies, software and financial companies, and key national tax professional associations.
• Creation: The group was formed as a new public-private partnership in August.
• Actions: CASST has been working to expand outreach and education on emerging scams, develop innovative approaches to identify potentially fraudulent returns, and create infrastructure improvements to protect taxpayers and tax systems.
• Accomplishments: CASST has already worked together on important changes to protect taxpayers and tax professionals for the 2025 filing season. These include the new Fuel Tax Credit Statement, increased review of “other withholding” claims, and efforts to address “ghost preparers”.
• Ongoing Effort: CASST recognizes the need for ongoing efforts given the continued expansion and threats from scams. The IRS and CASST anticipate that misinformation spread by influencers and outright scammers will intensify around the 2025 tax season.

Read the entire news release at https://www.irs.gov/newsroom/irs-casst-announce-2025-filing-season-changes-aimed-at-preventing-spread-of-scams-schemes-new-fuel-tax-credit-statement-and-increased-review-of-other-withholding-claims-among-highlights