Watch Out for These “Dirty Dozen” Tax Scams
Even though the tax deadline has passed, you still need to be aware of ongoing tax scams, including Coronavirus-related schemes. The IRS released its annual “Dirty Dozen” list of scams taxpayers should look out for throughout the year. The list helps raise awareness about common scams that fraudsters use to target people.
Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. There has been an increase in phishing scams and are using keywords such as “coronavirus,” “COVID-19” and “Stimulus” in various ways. The IRS will never initiate contact with taxpayers via email about a tax bill, refund or Economic Impact Payments. Don’t click on links claiming to be from the IRS. Be wary of emails and websites that may be scams to steal personal information.
Fake Charities: Criminals frequently exploit natural disasters and other situations such as the current COVID-19 pandemic by setting up fake charities to steal from well-intentioned people trying to help in times of need.
They may start with unsolicited contact by telephone, text, social media, e-mail or in-person using a variety of tactics. Bogus websites use names similar to legitimate charities to trick people to send money or provide personal financial information. Legitimate charities will provide their Employer Identification Number (EIN), if requested, which can be used to verify their legitimacy. Taxpayers can find legitimate and qualified charities with the search tool on IRS.gov.
Threatening Impersonator Phone Call: Bogus threatening phone calls from a criminal claiming to be with the IRS is a common scheme. The scammer attempts to instill fear and urgency in the potential victim. These calls often take the form of a robocall.
Social Media Scams: Taxpayers need to protect themselves against social media scams, which frequently use events like COVID-19 to try tricking people. Scammers use information from social media as ammunition for a wide variety of scams, including emails where scammers impersonate someone’s family, friends or co-workers. This can lead to tax-related identity theft.
EIP or Refund Theft: Criminals this year turned their attention to stealing Economic Impact Payments provided by the CARES Act. Much of this stems from identity theft whereby criminals file false tax returns or supply other bogus information to the IRS to divert refunds to wrong addresses or bank accounts.
Senior Fraud: Senior citizens and those who care about them need to be on alert for tax scams targeting older Americans, as seniors are more likely to be targeted and victimized by scammers than other segments of society. Phishing scams linked to Covid-19 have been a major threat this filing season. Financial abuse of seniors is also problem among personal and professional relationships.
Scams targeting non-English speakers: IRS impersonators and other scammers also target groups with limited English proficiency, which are often threatening in nature. Some scams also target those potentially receiving an Economic Impact Payment and request personal or financial information from the taxpayer. These phone scams pose a major threat to people with limited access to information, including individuals not entirely comfortable with the English language.
Unscrupulous Return Preparers: Most tax professionals provide honest, high-quality service, but dishonest preparers pop up every filing season committing fraud.
Taxpayers should avoid so-called “ghost” preparers who expose their clients to potentially serious filing mistakes as well as possible tax fraud and risk of losing their refunds. With many tax professionals impacted by COVID-19 and their offices potentially closed, taxpayers should take particular care in selecting a credible tax preparer.
Ghost preparers don’t sign the tax returns they prepare. They may print the tax return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost preparer will prepare but not digitally sign as the paid preparer. By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on returns.
Offer in Compromise Mills: Taxpayers need to wary of misleading tax debt resolution companies that can exaggerate chances to settle tax debts for “pennies on the dollar” through an Offer in Compromise (OIC). These offers are available for taxpayers who meet very specific criteria under law to qualify for reducing their tax bill. Dishonest companies oversell the program to unqualified candidates so they can collect a hefty fee from taxpayers already struggling with debt.
Fake Payments with Repayment Demands: Criminals are always finding new ways to trick taxpayers into believing their scam including putting a bogus refund into the taxpayer’s actual bank account. Anytime a taxpayer receives an unexpected refund and a call from us out of the blue demanding a refund repayment, they should reach out to their banking institution and to the IRS.
Payroll and HR Scams: Tax professionals, employers and taxpayers need to be on guard against phishing designed to steal Form W-2s and other tax information. These are Business Email Compromise (BEC) or Business Email Spoofing (BES). This is particularly true with many businesses closed and their employees working from home due to COVID-19. Two of the most common types of these scams are the gift card scam and the direct deposit scam.
Ransomware: Ransomware is malware targeting human and technical weaknesses to infect a potential victim’s computer, network or server. Malware is a form of invasive software that is often frequently inadvertently downloaded by the user. Once infected, ransomware looks for and locks critical or sensitive data with its own encryption. In some cases, entire computer networks can be adversely impacted.
Cybercriminals might use a phishing email to trick a potential victim into opening a link or attachment containing the ransomware. These may include email solicitations to support a fake COVID-19 charity. Cybercriminals also look for system vulnerabilities where human error is not needed to deliver their malware.
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