SHARE

The end of the year is quickly approaching, and so is tax season. In anticipation, the IRS announced its annual “Dirty Dozen” list of the worst tax scams circulating right now. Here’s a breakdown of the list and what to be on the lookout for.

Pandemic-Related Scams

The COVID-19 pandemic and the many corresponding changes to taxes created new opportunities for scammers to take advantage of people. As many of these changes enter into unfamiliar territory for most Americans regarding taxes, it’s essential to know what these scammers will target. Here are the main pandemic-related scams to look for:

Economic Impact Payment Identity Theft

What to look for:

• Text messages with links, random incoming phone calls, or emails inquiring about bank information or attempting to verify it

• Be alert for mailbox theft

What to do if you suspect a scam:

• If you receive any of these scam messages, do not click the links and delete any texts and emails received immediately. If you receive a call, don’t give any information, hang up and block the number

• Frequently check mail and report any suspected mail losses to the Postal Inspectors Office

• The IRS will never contact you via phone, text, email, or social media for personal information. The IRS official website is the only source for information and payment

Unemployment Fraud

What to look for:

• Receiving a Form 1099-G reporting unemployment compensation that you didn’t receive or file for

What to do if you suspect fraud:

• The IRS urges you to contact your appropriate state agency for a corrected form

• Read state-specific information here

Personal Information Cons

Personal information cons are one of the most common tax scams that circulate every year. It’s important to remember that the IRS will never personally contact you via phone, text, or email, and will never ask for personal information over any of these platforms. Here are a few of the most common ways these scammers try to get your information:

Tax-Related Phishing Scams

What to look for:

• Any email, text message, website, or social media message that attempts to collect personal information.

• Messages regarding large refunds, missing stimulus payments or issuing a threat.

What to do if you suspect a scam:

• Always be cautious of any link sent to you, especially if it claims to be the IRS or someone seeking your financial information. Do not click them, and delete any immediately upon receiving

• Do not open any attachments either

Impersonator Phone Calls

What to look for:

• Unexpected phone calls asking for personal information

• Phone calls from unknown callers

What to do if you suspect a scam:

• If you answer an unexpected call asking for personal information, security experts recommend asking questions but not disclosing any personal information

• If in doubt, hang up immediately

• Report the call to https://www.treasury.gov/tigta/  

Social Media Scams

What to look for:

• Emails, texts, and social media messages from sources impersonating family members and co-workers, usually including a link to something

What to do if you suspect a scam:

• Do not open any links in messages sent

• Report messages within the social media platform and delete them immediately.

• Review privacy settings in your social media (any information that can be viewed on your page can be used by scammers to target you.)

Ransomware

What it is: Ransomware is a form of malicious software that is designed to block access to computer systems and data. These are mainly targeted toward businesses and institutions.

What to look for:

• Messages that attempt to get you to download attachments from unknown sources or click links

• Pop-up windows with external links on a legitimate website

What to do if you suspect a scam:

• Report to IRS immediately

• Remain vigilant with regular cyber hygiene checks and cyber security controls

Rules Focusing on Unsuspecting Victims

Unfortunately, many tax scammers purposely prey on specific population groups, such as seniors and those with low English proficiency that may be more susceptible than others. Here are a few scams to be on the lookout for:

Fake Charities

What to look for:

• Requests to contribute to disaster relief funds

• Organizations pressuring to give immediately

What to do if you suspect a scam:

• Research the charity in question

• Verify charity is legitimate using the IRS Tax Exemption Organization Search Tool

Immigrant/Senior Fraud

What to look for:

• Telephone call threatening jail time, deportation, or revoking a driver’s license (immigrants)

• Any phone call asking for personal information (seniors)

What to do if you suspect a scam:

• Remember the IRS will only contact you via mail and will not threaten these things; these merely scare tactics by the scammer

• Fill out the IRS’s Schedule LEP document to request all IRS communications to be in your native language

• Utilize the revised forms for seniors

Unemployment Insurance Fraud

What to look for:

• Unemployment payments coming from a state other than the state in which the customer reportedly resides/worked

• Multiple state unemployment payments are made within the same timeframe

• Unemployment payments are made in the name of a person other than the account holder

• Numerous deposits or electronic funds transfers are made that indicate unemployment payments from one or more states/account holders

• A higher amount of unemployment payments is seen in the same timeframe compared to similar customers/amounts received

What to do if you suspect a scam:

• Read state-specific information here

Schemes that Persuade Taxpayers into Unscrupulous Actions

Unscrupulous tax promoters and preparers often execute these tax schemes, disguising them as “deals” that cheat the system. They can be harder to identify because they require you to be familiar with tax rules and not blindly trust the professional advising you.

They all share common warning signs. A professional attempts to get you a “better deal” using methods that skirt the system. A good rule of thumb for identifying these scams is that if it sounds too good to be true, it probably is.

Some common scams that fall under this category are syndicated conservation easements, abusive micro-capture arrangements, abusive use of the US Malta Tax Treaty, improper claims on business credits, and improper monetized installments. Here are a few scams to be on the lookout for:

Unscrupulous Tax Return Preparers

What to look for:

• Preparers that won’t sign returns that they prepare

• Preparers requiring cash payment only

• Preparers who invent income to qualify their clients for tax credits

• Preparers who claim fake deductions to boost the size of the refund

• Preparers who direct refunds into their bank account, not the taxpayer’s account

What to do if you suspect a scam:

• Discontinue all work with the offending professional immediately and select a reputable tax preparer

• Familiarize yourself with the qualifications and requirements of tax preparers using the IRS credentials resource

Offer in Compromise (Mills)

What to look for:

• Offers claiming to settle tax debts for “pennies on the dollar”

• Promoters claiming they can obtain larger offer settlements

What to do if you suspect a scam:

• Use the IRS OIC Pre-Qualifier to see if you’re even eligible for the program

• Visit the IRS website for details about penalty information rather than a third party

• Discontinue all work with the offending professional immediately and select a reputable tax preparer

Questions

Have questions about any of the scams? Do you think you’ve been the victim of a scam? Our tax experts are here to help. Contact Us.