Watch Out for These IRS Dirty Dozen Tax Scams

The IRS released its annual list of “Dirty Dozen” tax-related schemes. It includes pandemic-related scams and other tactics that defraud victims. The IRS urges all taxpayers to be on guard, especially during the pandemic, for themselves and other people in their lives.

Economic Impact Payment theft

IRS tax guidanceTaxpayers should watch out for identity thieves who try to steal Economic Impact Payments. This includes scams involving text messages, random incoming phone calls or emails inquiring about bank account information or requesting recipients to click a link or verify data. The IRS won’t initiate contact by phone, email, text or social media asking for Social Security numbers or other personal or financial information related to Economic Impact Payments.

Unemployment fraud

Scammers took advantage of the pandemic by filing fraudulent claims for unemployment compensation using stolen personal information of individuals who had not filed claims. Payments made on these fraudulent claims went to the identity thieves. Taxpayers should be on the lookout for receiving a Form 1099-G reporting unemployment compensation that they didn’t receive.

Tax-related phishing scams

Phishing schemes involving fake emails, text messages, websites and social media attempts to steal personal information remain a major cause of identity theft throughout the year. Phishing scams target individuals with communications appearing to come from legitimate sources to collect victims’ personal and financial data and potentially infect their devices by convincing the target to download malicious programs.

Phishing scams targeting tax professionals

Tax professionals should be aware of an increase in phishing scams involving verification of Electronic Filing Identification Numbers (EFIN) and Centralized Authorization File (CAF) numbers.

New client phishing scams target tax pros

The “New Client” scam continues to be a prevalent form of phishing for tax pros. This entails an email mentioning an urgent tax issue and has attachments.

Impersonator phone calls/vishing

There has been an increase in voice-related phishing, or ‘vishing,’ particularly from scams related to federal tax liens. If you receive a phone call out of the blue, security experts recommend asking questions of the caller but not providing any personal information. If in doubt, hang up immediately.

Social media scams

Social media scams frequently use events like COVID-19 to try to trick people and can lead to tax-related identity theft. Using personal information, a scammer may email a potential victim and include a link to something of interest to the recipient, but which contains malware intended to commit more crimes.

Ransomware

Malicious software (“malware”) designed to block access to a computer system or data by encrypting data or programs on information technology systems is used to extort ransom payments from victims in exchange for decrypting the information and restoring victims’ access to their systems or data. Ransomware attacks are increasing across various sectors, including governmental entities as well as financial, educational and healthcare institutions.

Fake charities

Scammers set up fake organizations to take advantage of the public’s generosity for tragedies and disasters, such as the COVID-19 pandemic. Scams requesting donations for disaster relief efforts are especially common on the phone. Taxpayers should always check out a charity before they donate, and they should not feel pressured to give immediately.

Immigrant/senior fraud

IRS impersonators and other scammers are known to target groups with limited English proficiency as well as senior citizens. These scams are often threatening jail time, deportation or revocation of a driver’s license from someone claiming to be with the IRS.

Offer in Compromise “mills”

Offer in Compromise mills mislead people with no chance of meeting the program requirements while charging excessive fees, often thousands of dollars. Taxpayers should be beware of promoters claiming their services are needed to settle with the IRS, that their tax debts can be settled for “pennies on the dollar” or that there is a limited window of time to resolve tax debts through the Offer in Compromise program.

Unscrupulous tax return preparers

Taxpayers should be wary of preparers who won’t sign the tax returns they prepare, often referred to as ghost preparers. For e-filed returns, the “ghost” will prepare the return, but refuse to digitally sign as the paid preparer. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.

Unemployment insurance fraud

Unemployment fraud often involves individuals acting in coordination with or against employers and financial institutions to get state and local assistance to which they are not entitled. These scams can pose problems that can adversely affect taxpayers in the long run.

Promoted abusive arrangements

Taxpayers should watch out for schemes peddled by tax promoters, including syndicated conservation easements, abusive micro-captive insurance arrangements and other abusive arrangements. These promoters who make false claims about their legitimacy and charge high fees to boot.

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