Beware the “Dirty Dozen:” Common Tax Scams to Avoid

Beware the “Dirty Dozen:” Common Tax Scams to Avoid

In 2020, the IRS released a “Dirty Dozen” of prevalent tax scams. Here’s what to watch out for!

The IRS regularly compiles a list of the “Dirty Dozen,” or the 12 most common scams that target taxpayers. This list is always changing and evolving, and some risks have been heightened because of the COVID-19 pandemic. It’s important to be aware of the latest threats to protect yourself from tax fraud or identity theft.

Here is the latest Dirty Dozen list from the IRS, followed by guidance on how you can avoid these schemes:

  1. Phishing
  2. Fake charities
  3. Threatening impersonator phone calls
  4. Social media scams
  5. Economic impact payments or refund theft
  6. Senior fraud
  7. Non-English-speaker scams
  8. Return preparers
  9. Offer-in-Compromise mills
  10. Fake payments with repayment demands
  11. Payroll/HR
  12. Ransomware

1. Phishing

Phishing is a tax scam that continues to be among the most common each year. Scammers send fake emails or create fake websites posing to be the IRS and asking for personal information. Remember that the IRS will never contact you over email about your taxes. And official government websites will always have a .gov address and be HTTPS secure.

2. Fake charities

Especially during a tumultuous year like 2020, scammers will often try to convince people that they’re a charity and ask for money. Be wary of any unsolicited communication you receive in an email, by phone or text, or on social media.

3. Threatening impersonator phone calls

Taxpayers may receive phone calls from criminals who claim to be from the IRS and emphasize the urgency of their request. They want to scare you into sending them your personal information or money. The IRS says that it will never make such demands or threats.

4. Social media scams

Unfortunately, social media platforms have involved a growing proportion of identity theft related to taxes or impersonation scams. Because attackers can see information about you on your profiles, like your friends’ and family members’ identities, they may try to impersonate your loved ones to trick you.

5. EIP or refund theft

Economic impact payments (EIPs) were distributed as part of the CARES Act in 2020, and criminals turned their attention to stealing these payments via identify theft or providing false addresses to the IRS. This scam is a way for attackers to take advantage of many already vulnerable or struggling individuals.

6. Senior fraud

Scammers have long targeted older Americans in their tax scams. Elder fraud is an ongoing issue where attackers take advantage of this population by getting them to respond to fake emails or phone calls with their personal information. In 2020, COVID-19-related scams were especially prevalent for seniors.

7. Non-English-speaker scams

Criminals regularly attack groups with limited English proficiency, and they often use demanding and threatening tactics to gain personal or financial information. Tactics may include threats of legal action if the taxpayer doesn’t return the phone call. These attacks are usually conducted over the phone and sometimes use a pre-recorded message.

8. Return preparers

Taxpayers may turn to a preparer to ensure their return is filed correctly. Unfortunately, there are some unscrupulous return preparers out there who gain access to sensitive data and exploit it. It’s vital that taxpayers always carefully vet the person or company they hire to ensure their legitimacy. 

9. Offer-in-Compromise mills

Watch out for Offers in Compromise, which are offers to taxpayers to reduce their tax bill or settle their tax debts. Some of these solicitations are legitimate, and the programs can help people. But dishonest companies will try to sell offers to individuals who don’t qualify in attempts to collect bigger fees from taxpayers who are already burdened by a lot of debt. The IRS says that in 2019, there were 54,000 Offers in Compromise submitted to the agency, but only 18,000 were accepted.

10. Fake payments with repayment demands

Another common scam happens when an attacker demands the repayment of a tax refund. Sometimes, the scammer will even file a fake tax return and have the refund deposited into the taxpayer’s bank account, only to call them posing as an IRS employee and demand that they return it.

11. Payroll and HR scams

Common HR scams are Business Email Compromise (BEC) or Business Email Spoofing (BES), where scammers steal tax information like Form W-2 data. These have been more common with COVID-19 work-from-home requirements. Criminals will often request wire transfers, use false IRS documents, or create fake invoices.

12. Ransomware

Ransomware is a form of malware (invasive software) that infiltrates a computer, network, or server. Ransomware will gather personal information or sensitive data once it’s inside the network. Companies and taxpayers can prevent this from happening by using a multi-factor authentication method on devices and networks as extra protection when logging in.

Working with a qualified tax expert can help you avoid scams

Tax scams happen all the time, and you need to be prepared. Always watch out for unsolicited messages and phone calls, and be wary anytime someone says they’re an IRS employee and they make any demands or threats. 

Working with a credible tax professional can help you avoid these scams. The team at Provident CPA & Business Advisors is ready to help you understand your taxes this year and help you safely file a return. Contact us to get started!

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