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"The Dirty Dozen": Stop Tax Scams in their Tracks.

Updated: Dec 13, 2020



The Internal Revenue Service (IRS) recently released its annual “Dirty Dozen” list of tax scams. This year’s list emphasized the rise of schemes targeting coronavirus tax relief, especially Economic Impact Payments.


Anyone can fall victim to a convincing fraudster, which is why every taxpayer needs to be able to identify the following types of scams.


1. Phishing


Beware of fake emails and websites that can contain false links to the IRS or other sites that ask you for your personal financial information.


The IRS will never initiate communication with taxpayers via email. The IRS Criminal Investigation has seen an overwhelming rise in phishing schemes that include mass emails and text messaging using buzz words like “COVID-19,” “stimulus,” and “payment.”


2. Fake Charities


Criminals tend to exploit events like natural disasters or the current coronavirus pandemic to steal from unsuspecting people trying to donate in times of need.


When donating make sure you are giving to a well-known organization on that organization’s website. Fraudsters are known for putting up bogus websites using similar domain names to trick people into handing over their financial information.


Visit irs.gov for a list of legitimate and qualified charities.


3. Threatening Phone Calls


Bogus IRS phone calls are typically characterized by threatening the victim with arrest, deportation, or license revocation if the victim doesn’t immediately pay the fictitious tax bill.


Phone scams are meant to instill fear and create urgency in the victim to gain access to financial information and receive payment the victim will not be able to recover.


The IRS will never threaten or demand immediate payment over the phone.


4. Social Media Scams


Scammers utilize social media to dispense false information while gaining access to your personal data. Cybercriminals tend to impersonate a family member, friend, or co-worker when contacting a potential victim.


The criminal infiltrates the victim’s email and cell phone to send links containing malware or solicitations to fake charities to gain access to the financial information of more victims.


5. Refund or Economic Impact Payment Theft


Refund theft is rooted in identity theft. Fraudsters file fake tax returns using stolen social security numbers or other false information. Under the veil of your identity, the fraudster then diverts your refund to their own bank account or bogus address.


As part of the coronavirus aid package, many Americans received Economic Impact Payments (EIP). The IRS recently released guidance about the payments warning nursing homes and long-term care facilities not to take possession of the payments that care residents received. Because the EIP is treated as a tax refund and not as taxable income of the recipient, nursing care facilities cannot seize the payment or use the payment in determining care eligibility.


6. Senior Fraud


Many agencies including the IRS, FBI, and DOJ recognize the pervasiveness of scams targeting older Americans. Seniors are less likely to be the victims of fraud when a trusted friend or family member takes an interest in a senior’s affairs.


Seniors should beware of fake emails, text messages, phone calls, and social media scams as they become more comfortable with newer technology.


7. Scams Targeting Non-English Speakers


Scammers target vulnerable populations including non-English speakers. Individuals not completely comfortable with the English language, especially recent immigrants, should not engage with fraudsters. Immigrants should know that any claim from the IRS about deportation or license revocation if a person does not make payment immediately are ludicrous and untrue.


8. Dishonest Return Preparers


The vast majority of tax professionals provide high-quality service and advise you honestly. Nevertheless, a small number of corrupt tax preparers tend to crop up annually. Watch out for the following warning signs when selecting a tax preparer: they promise inflated refunds when you don’t normally receive a refund or file a tax return, they have you sign a blank tax return, they don’t provide their PTIN (Preparer Tax Identification Number), or they charge a fee based on a percentage of your refund.


Know that you, as the taxpayer, are ultimately responsible for the accuracy of your tax return regardless of who prepares it, therefore be vigilant when selecting a tax preparer.


9. Offer in Compromise Mills


If it sounds too good to be true, it probably is. Taxpayers should be wary of companies that offer to settle your tax debts for a fraction of what you owe. Companies tend to oversell the program so as to collect exuberant fees from people already under the weight of overwhelming debt.


Taxpayers can use a free online Offer in Compromise tool to see if they are pre-qualified through the IRS.


10. Fake Payments with Repayment Demands


One of the newest tricks that fraudsters are utilizing is directing fake tax refunds to a victim’s bank account. The scam artist then poses as an IRS employee, who tells the taxpayer that they received the refund in error and must return the money in the form of gift cards. The fraudster gets some money and has gained access to your bank account in the process.


11. Payroll and HR Scams


Employers are susceptible to scams during year-end processing such as the preparation of W-2s and other tax documents. Employers should use reputable computer software or tax professionals to prepare these documents. Be wary of emails you receive from payroll or HR processors since fraudsters can copy email addresses (with a change of a few letters or symbols) and may attach a fake invoice with a link for you to enter your financial information.


12. Ransomware


Ransomware is a type of malware that infects a computer, network, or server and holds critical data hostage until payment is received.

Avoid ransomware by deleting untrustworthy messages containing links, frequently running virus scans on your devices, and using a multi-factor authentication system when you access important documents or when you sign on to sites that contain your personal and financial information.

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