The IRS' Dirty Dozen: Tax Scams to Watch Out For
Updated: Nov 3
The IRS has just released their annual list of tax scams to watch out for. This year, the "Dirty Dozen" includes phishing schemes, identity theft and phone scams. All items on this list are designed to take advantage of unsuspecting taxpayers - some more than others.
To help protect yourself from these scams, here is a breakdown of what you need to know about each one:
The IRS warns people to be wary of fraudsters who set up phony charities to take advantage of the public's goodwill. They take use of catastrophes and calamities, such as the COVID-19 epidemic, to their benefit.
On the phone, scams soliciting money for disaster relief efforts are particularly frequent. Taxpayers should always research a charity before donating, and they should not feel obligated to do so right away.
Taxpayers who donate money or products to a charity may be eligible to deduct the amount of their taxable income on their federal tax return. However, taxpayers should keep in mind that they must give to a recognized charity in order to obtain a deduction.
Stimulus Payment Theft
Individuals are still being targeted by identity thieves who are attempting to steal Economic Impact Payments (EIPs), commonly known as stimulus payments. The IRS will send most eligible taxpayers their payments automatically. Taxpayers should be aware of the following warning indicators of a scam:
Any text messages, phone calls, or emails urging recipients to click a link or verify data or enquiring about bank account details should be deemed suspect and destroyed without opening.
Keep an eye out for mailbox thievery. Check your mail on a regular basis and report any suspected mail losses to the Postal Inspectors.
Don't be fooled by phony stimulus checks. The IRS will not approach you through phone, email, text, or social media to request your Social Security number or other personal or financial information in connection with Economic Impact Payments.
Immigrants & Senior Citizens
Impersonators of the IRS and other fraudsters are known to prey on those with weak English skills and the elderly. The nature of these frauds is frequently frightening.
While the IRS impersonation fraud has been less prevalent in recent years, it is still a common hoax. When a taxpayer receives a phone call from someone pretending to be from the IRS, they are threatened with jail time, deportation, or the cancellation of their driver's license. Recent immigrants are generally the most susceptible taxpayers, and they should disregard the threats and avoid engaging the scammer.
Offer In Compromise Mills
Offer in Compromise mills twist the IRS program into something it isn't, deceiving people who have little chance of completing the standards while demanding exorbitant fees, often in the hundreds of dollars.
Promoters who claim to be able to get bigger offer settlements than others or who make deceptive claims that the IRS would accept an offer for a small percentage should be avoided.
Suspicious Tax Preparers
Although most tax preparers are honest and trustworthy, taxpayers should be aware of "ghost preparers," who refuse to sign the tax returns they prepare. The "ghost" will prepare the return for e-filing, but will not digitally sign as the paid preparer.
Unemployment Insurance Fraud
Individuals who commit unemployment fraud frequently work with or against businesses and financial organizations to get state and municipal benefits to which they are not entitled. These schemes have the potential to cause difficulties for taxpayers in the long run.
The following unemployment insurance frauds should be avoided by states, businesses, and financial institutions:
Employer-Employee Collusion Fraud
Misrepresentation of Income Fraud
Fictitious Employer-Employee Fraud
Persistent Tax-Related Phishing Scams
The IRS is warning individuals, companies, and tax experts to be on the lookout for ongoing attempts to steal personal information using phony emails, text messages, websites, and social media. These assaults are more common during tax season and are a key source of identity theft all year.
Phishing schemes target people with messages that look to originate from reputable sources in order to obtain personal and financial information from them, as well as infect their devices by enticing them to download harmful applications.
Phishing Scams targeting Tax Professionals
The IRS cautions tax professionals about phishing schemes using the verification of Electronic Filing Identification Numbers (EFIN) and Centralized Authorization File (CAF) numbers as part of the Security Summit initiative. These types of frauds, as well as promises to purchase and trade EFINs and CAFs, have increased, according to the agency.
New Client Phishing Scams
For tax professionals, the "New Client" phishing scam is still widespread. In the form of an email, a scammer might contact a tax professional stating that they have an urgent tax-related issue and ask if they're taking on new clients.
One attachment is an IRS notice, and the other is the potential client's prior-year tax return, according to the email. Because there are so many versions of this scam, tax professionals should be cautious and avoid opening files or clicking links from senders they don't recognize.
Impersonator Phone Calls/Vishing
Unexpected phone calls for personal financial information should be avoided. Voice-related phishing, or 'vishing,' has increased, according to the IRS, notably from schemes involving federal tax liens. When getting unexpected phone calls, security experts advise asking the caller questions but avoiding revealing any personal information. If you're unsure, hang up right away.
Social media Scams
Social media frauds, which commonly exploit events like COVID-19 to try to deceive people, should be avoided by taxpayers. Shady people might lurk on accounts on social media and harvest personal information to use against the victim. These con artists may write emails pretending to be a member of the victim's family, acquaintances, or coworkers.
Financial institutions should be aware of ransomware trends and signs. Ransomware is a type of malware that is meant to prevent users from accessing a computer system or data. Encrypting data or programs on IT systems is frequently used to extract ransom payments from victims in return for decrypting the material and restoring victims' access to their systems or data. In certain situations, the offenders threaten to reveal sensitive files belonging to the victims, who might be people or businesses.
American tax payers must be conscious about these scams! On top of having to be worrisome of these scammers, millions of Americans are still liable of tax debt. This could be a lot on one's plate, but there's a program that might just do the trick. The IRS Fresh Start Program is an effective way to take control of your tax situation. This program offers a variety of solutions for taxpayers who are struggling with unpaid taxes, and ensures that you will not be penalized or face additional penalties if you qualify for the program. So what are you waiting for? The time to begin this process is now!
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