!DOCTYPE html> Tax Pert | Falsifying Income To Claim Tax Credits | A Tax Consulting Site

It’s usual to think of taxpayers hiding income in order to avoid taxation but there’s another scheme involving misrepresenting income: inflating or including income on a tax return that was never earned, either as wages or as self-employment income, in order to maximize credits, especially refundable credits.

Refundable tax credits are those like the Earned Income Tax Credit and the Additional Child Tax which require earned income in order to qualify.

With a refundable credit, you can receive a refund even if you do not owe any tax.

This provides some taxpayers (and unscrupulous preparers) with an incentive to lie about income in order to claim the credit.

Taxpayers who engage in this behavior not only have to pay back the erroneous refunds, including interest and penalties but may face criminal prosecution.