Each year, the IRS produces a list of its “Dirty Dozen” tax scams. These scams tend to spike from December through April, but they can—and do—happen year-round. It’s wise to stay on top of the latest list of common issues—and take some simple steps to stay safe from them.
Here’s a recap of this year’s IRS Dirty Dozen, along with tips to protect yourself against the consequences of them:
Be hyper-alert for fake emails or websites looking to steal personal information, especially during tax season. The IRS will never send taxpayers an email about a bill or refund out of the blue.
- Don’t click on one claiming to be from the IRS
- Be wary of emails and websites that may be nothing more than scams to steal personal information
Phone calls from criminals impersonating IRS agents remain an ongoing threat. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation, and license revocation, among other things.
- Never give out information—especially your Social Security Number—to someone claiming to represent the IRS
- If you must, call the IRS directly; you can get the number from IRS.gov or a phone directory at your local library
Return Preparer Fraud
Be on the lookout for unscrupulous return preparers. Legitimate tax professionals are a vital part of the U.S. tax system. The vast majority provide honest, high-quality service. There are some dishonest preparers who operate each filing season to scam
clients, perpetuate refund fraud, identity theft and other scams that hurt taxpayers.
- Get a preparer recommendation from a person you trust
- Turn to a well-known brand preparer company
Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations.
- Take a few extra minutes to ensure your hard-earned money goes to legitimate and currently eligible charities
- Use tools on IRS.gov to check out the status of charitable organizations
Social Media Scams
Be aware of the potential for social media scams that 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 which contains malware intended to commit more crimes. Scammers also infiltrate their victim’s emails and cell phones to go after their friends and family with fake emails that appear to be real and text messages soliciting,
for example, small donations to fake charities that are appealing to the victims.
• Confirm the legitimacy with your family member/friend outside of social media before clicking a link or making a donation
Fake Payments with Repayment Demands
A con artist steals or obtains a taxpayer’s personal data including Social Security number or Individual Taxpayer Identification Number (ITIN) and bank account information. The scammer files
a bogus tax return and has the refund deposited into the taxpayer’s checking or savings account. Once the direct deposit hits the taxpayer’s bank account, the fraudster places a call to them, posing as an IRS employee. The taxpayer is
told that there’s been an error and that the IRS needs the money returned immediately or penalties and interest will result. The taxpayer is told to buy specific gift cards for the amount of the refund.
- The IRS will never demand payment by a specific method
- If you receive an unexpected refund and a call from the IRS demanding a refund repayment, contact your banking institution and IRS
EIP or Refund Theft
Criminals this year also turned their attention to stealing Economic Impact Payments (EIP) as provided by the Coronavirus Aid, Relief, and Economic Security (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.
- Taxpayers can consult the Coronavirus Tax Relief page of IRS.gov for assistance in getting their EIPs
- Anyone who believes they may be a victim of identity theft should consult the Taxpayer Guide to Identity Theft on IRS.gov
Offer in Compromise Mills
Be 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). But unscrupulous companies
oversell the program to unqualified candidates so they can collect a hefty fee from taxpayers already struggling with debt. Although the OIC program helps thousands of taxpayers each year reduce their tax debt, not everyone qualifies for an OIC.
- You can use the free online Offer in Compromise Pre-Qualifier tool to see if you qualify
- Taxpayers can apply for an OIC without third-party representation; but if you do solicit help, be cautious about whom you hire
Scams Targeting Non-English Speakers
IRS impersonators and other scammers may target groups with limited English proficiency, often in a threatening nature. These calls frequently take the form of a “robocall”
(a text-to-speech recorded message with instructions for returning the call), but in some cases may be made by a real person. These con artists may have some of the taxpayer’s information, including their address, the last four digits of their
Social Security number, or other personal details. A common one remains the IRS impersonation scam where a taxpayer receives a telephone call threatening jail time, deportation, or revocation of a driver’s license from someone claiming to be
with the IRS.
- Taxpayers who are recent immigrants often are the most vulnerable and should ignore these threats and not engage the scammers
- Some target those potentially receiving an Economic Impact Payment and request personal or financial information from the taxpayer
Payroll and HR Scams
Be on guard against phishing designed to steal Form W-2s and other tax information, also known as 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. Currently, two of the most common types of these scams are the gift card scam and the direct deposit
- The Direct Deposit and other BEC/BES variations should be forwarded to the Federal Bureau of Investigation Internet Crime Complaint Center (IC3) where a complaint can be filed
- The IRS requests that Form W-2 scams be reported to: email@example.com (Subject: W-2 Scam)
Ransomware is malware — an invasive software often inadvertently downloaded by the user — targeting human and technical weaknesses to infect a potential victim’s computer, network, or server. Once
downloaded, it tracks activity and once infected, ransomware looks for and locks critical or sensitive data with its own encryption.
- Cybercriminals might use a phishing email to trick a potential victim into opening a link or attachment containing the ransomware, such as solicitations to support a fake COVID-19 charity
- Use the free, multi-factor authentication feature being offered on tax preparation software products
Seniors are more likely to be targeted and victimized by scammers than other segments of society. Financial abuse of seniors is a problem among personal and professional relationships. Older Americans are becoming more
comfortable with evolving technologies, such as social media. Unfortunately, that gives scammers another means of taking advantage. Phishing scams linked to Covid-19 have been a major threat this filing season.
- Seniors need to be alert for a continuing surge of fake emails, text messages, websites, and social media attempts to steal personal information
- Elder fraud is less likely when the service provider knows a trusted friend or family member is taking an interest in the senior’s affairs
Working with Janney
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Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.