IRS addresses tax credit refunds and fraudulent preparer schemes

The Treasury Inspector General for Tax Administration (TIGTA) has identified a fraudulent scheme involving “ghost preparers” linked to approximately $179 million in potentially fraudulent tax refunds. These preparers, who are included in the IRS “Dirty Dozen” list, fail to sign returns or provide valid tax identification numbers. TIGTA reported that 47 preparers were linked to over $94 million in requested refunds for the 2023 tax year, while 65 preparers were linked to more than $85 million for the 2024 tax year.

In a separate development, the IRS has begun issuing automatic refunds to more than 50,000 taxpayers regarding unused adoption tax credits. Following a Treasury Department clarification of the Working Families Tax Cuts Act, unused balances accrued between 2020 and 2024 can now increase the refundable portion of the credit for fiscal year 2025, up to $5,000 per eligible child. The IRS is processing these adjustments automatically, meaning affected families do not need to file amended returns.