IRS Skirts TikTok Ban to Sniff Out Tax Scammers

The IRS is dealing with a couple of big issues involving TikTok. It turns out some IRS employees aren't complying with the government-wide ban on the Chinese-owned app on federal devices. But there could be a good reason why some in the tax agency skirted the rule.

Earlier this year, the IRS warned taxpayers about scams and inaccurate social media advice. The agency said to be on guard against fake refund claims for several tax credits including the Fuel Tax credit, Sick and Family Leave credit and the Household Employment Tax.

Chief among these scammers were TikTok users. So it might not be surprising that the site has attracted the attention of the IRS and garnered the public eye again as a major TikTok court hearing was held early this week. (More on that below).

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We’ll cover how and why the tax agency has tried to work around the TikTok on government devices ban, the tax credits behind the scams, and what you can do if you filed an inaccurate return due to scam or fraud. 

We'll also talk a little about whether TikTok will be banned from mobile app stores in the United States as soon as January 2025. Read on. 

Is TikTok banned in the US?  

Congress enacted a government-wide ban on TikTok on federal devices almost two years ago due to security concerns regarding the social media platform's Chinese ownership. The ban disallows the app’s use on all federal government devices, with some exceptions. 

Yet a report released late last year by the Treasury Inspector General for Tax Administration (TIGTA) found that the IRS continued to allow the app on some devices despite not having an exception.

While the TIGTA audit found that the IRS mostly complied with the TikTok government agency ban, the agency: 

• Had 23 unmanaged (personal) devices that still had  access to the app (though corrective action was taken)
• Gave more than 2,800 Criminal Investigation unit devices the ability to access TikTok

The IRS agreed to update its policy regarding unmanaged devices. However, the tax agency disagreed with completely preventing its Criminal Investigation (CI) Unit from accessing the app. 

The justification for this seems to be tied to investigative activities. The IRS CI division investigates federal crimes, including tax-related scams and fraud. The argument is that monitoring TikTok can help root out illegal activity as well as tax scams and misinformation campaigns.

After the federal restriction was passed, 34 states enacted similar bans, potentially inhibiting progress on the scammer investigation. 

For example, the IRS recently formed a group, the ‘Coalition Against Scam and Scheme Threats’ (CASST) to “combat the growth of scams and schemes threatening taxpayers and tax systems.” State tax agency members who helped form the group may similarly face difficulty skirting the TikTok prohibition.

So, what are the details of common TikTok tax scams to look out for? 

Tax scams promoted on TikTok 

While scammers may falsely advertise other tax credits, like clean energy tax credits, or run other scams mentioned in the IRS’ Dirty Dozen campaign, the following are prominent scams used earlier this year.

The Fuel Tax Credit. This credit is designed for off-road business vehicles and farming equipment. Taxpayers needed a business purpose and a qualifying business activity (such as farming or purchasing aviation gasoline) to qualify.

The Sick Leave and Family Leave Credit. Intended for self-employed individuals during the pandemic, this credit was not available for original 2023 returns, but some people still filed. Taxpayers could not use it for income earned as an employee or a non-self-employed individual. 

Household Employment Taxes. Household Employment Taxes allowed a refund based on sick and family medical leave wages. Some taxpayers “invented” fictional household employees for wages they never paid.

Most taxpayers don’t qualify for the above tax breaks; however, scammers on social media websites, including TikTok, overemphasize the significance and availability of the tax credits.

“Scam artists constantly prey on people’s hope and try to use the complexity of the tax system to convince people there are secret ways to get a big refund,” IRS Commissioner, Danny Werfel said in a release. 

How to file an amended tax return

So, what can you do if you fell for one of these scams? The IRS asks taxpayers who improperly claimed these credits to file an amended return. 

You can confirm whether you need to amend your federal income tax return using an IRS.gov tool. Then you can file a Form 1040-X. to amend your return. 

Note: You must file the original return first before amending it.

However, you may have already received an IRS notification regarding tax credits improperly claimed on your prior return. If that is the case, the letter will generally require a response within 30 days, or you can contact the IRS to request an extension. You may need to first authenticate your identity before amending a return. 

Consult with a tax professional for further guidance.

TikTok court case

How far should the TikTok USA ban go? Who should be exempt? Could TikTok could be banned for all U.S. devices? 

Legislation passed by Congress earlier this year provides that, unless TikTok’s owner divests from the company, TikTok may be banned from U.S. mobile app stores in January 2025. 

However, the app’s owner, ByteDance has said it doesn't intend to sell.

Instead, TikTok sued the U.S. government. In the case, TikTok vs. Garland, the company is arguing, in part, that without a proven national security threat, the law forcing TikTok to sell violates the First Amendment right to free speech. 

During opening arguments in a September 16 court hearing, Andrew Pincus, an attorney representing TikTok creators argued, “For the first time in history, Congress has expressly targeted a specific U.S. speaker, banning its speech and the speech of 170 million Americans."

The hearing before a three-judge panel was held in the Federal Court of Appeals for the District of Columbia. If the case isn’t resolved there, it could eventually end up in the U.S. Supreme Court. 

Once more, the government has yet to define the scope of TikTok’s national security threat. Those documents are sealed and even ByteDance reportedly doesn’t know their contents.

But as the TIGTA report suggests, enforcing a ban on downloading or updating a social media app, a move that could impact hundreds of millions of U.S. users, is easier said than done. 

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