Every year, the Internal Revenue Service compiles a listing of the most popular tax scams. Affectionately known as the “Dirty Dozen,” the list features a variety of common scams that taxpayers may encounter at any time – not just during peak tax filing season.
Scammers continue to come up with new ways to steal information from unsuspecting taxpayers. To avoid to getting caught up in these scams, the IRS warns everyone to avoid sharing sensitive personal data over the phone or via email or social media.
I have pared down the list to the 2023 tax scams I most frequently observe in working with clients. How many of these scammers have reached out to you?
Employee Retention Credit Claims
Have you heard ads on the radio and internet touting large refunds related to the Employee Retention Credit (ERC)? Don’t believe what you hear. The IRS highlighted these blatantly aggressive schemes, which can be based on inaccurate information related to eligibility for and computation of the ERC. And some of these promotions aim solely to collect taxpayers’ personal information, which scammers then use to conduct identity theft.
Phishing and Smishing
Taxpayers and tax professionals should be vigilant about fake communications from individuals posing as legitimate organizations in the tax and financial community, including the IRS and the states. These messages arrive in the form of an unsolicited text (smishing) or email (phishing), luring unsuspecting victims to provide valuable personal and financial information that can lead to identity theft.
REMEMBER: The IRS initiates most contacts with taxpayers through regular mail and will never initiate contact by email, text or social media regarding a bill or tax refund.
Online Account Help from Third-Party Scammers
Swindlers pose as a “helpful” third party offering to help create a taxpayer’s IRS Online Account. In reality, no help is needed – the scammers are actually trying to steal the taxpayer’s personal information. (You can, and should, establish your own online account through IRS.gov.)
Fake charities
Bogus charities are a perennial problem that gets bigger when there is a crisis or natural disaster. Scammers set up fake organizations to take advantage of the public’s generosity, seeking money and personal information which can be used to further exploit victims through identity theft.
Unscrupulous Tax Return Preparers
Most tax preparers provide outstanding and professional service. But be wary of shady tax professionals and “ghost” preparers. Common red flags include charging a fee based on the size of the refund, and refusing to sign the return or include their IRS Preparer Tax Identification Number (PTIN) as required by law. Word to the wise: never sign a blank or incomplete return!
Offer in Compromise Mills
Offers in Compromise is an important program that helps people who can’t pay to settle their federal tax debts. But “mills” aggressively promote Offers in Compromise in misleading ways to individuals who clearly don’t meet the qualifications – frequently costing taxpayers thousands of dollars.
As part of its Dirty Dozen awareness effort, the IRS is encouraging everyone to report people who promote improper and abusive tax scams as well as tax return preparers who deliberately prepare improper returns. Click here for more information: Abusive Tax Schemes and Abusive Tax Return Preparers.
