05/12/2023
Greetings Everyone!
Earlier this year the IRS released a series of articles outlining what they playfully call “The Dirty Dozen Tax Scams”. It should go without saying that such titling whimsey is where the IRS sense of humor ends. As the name of the articles implies, they are dealing with the “top 12” most prevalent tax fraud schemes to watch out for.
Since you are reading this well after the tax filing season is over, we may as well skip to the end: These tax fraud schemes are something that you should be wary of every day. The reason the IRS highlights these frauds is twofold. One is obvious; your personal data is at risk and you are vulnerable unless you know about the scams and you take precautions to avoid them. Every one of these frauds plays on some way to beat the system. All of them hope lure you into forgetting one very simple axiom: If it seems too good to be true…
… You can fill in the rest.
So now that I’ve spoiled the ending let’s get into the details. In no particular order here is our version, in concert with the IRS, are the Tax Return frauds to watch out for in 2023:
1) For business owners! The Employee Retention Credit: There are very specific requirements to qualify for these pandemic-era credits and the danger zone lies in the information required to qualify & calculate the amount of the credit. When you are offering up your payroll information, you had better be sure you are talking with the right person. And even though the scammers make it sound like it’s quick and easy to get, we can assure you… they are not available to just anyone.
2) For all of us! The IRS again includes a warning about phishing and smishing schemes where cybercriminals try to steal a taxpayer's information through scam emails or text messages. If you don’t recognize the email or text came from, delete it and move on.
3) For everybody! There is a prevalence of bad actors online that try to sell or offer to set up an Online Account on IRS.gov. These scammers often ask for the taxpayer's personal information including address, Social Security number or Individual Taxpayer Identification number (ITIN) and photo identification. The criminal then sells this valuable information to other criminals OR, they can use your personal information to file fraudulent tax returns, obtain loans, open credit accounts and make withdrawals from your bank and investment accounts.
4) For y,all! The Internal Revenue Service today warned taxpayers to watch out for promoters pushing improper fuel tax credit claims that taxpayers aren't qualified to receive. These scammers will often charge a hefty fee for preparing these bogus claims. And you’ll be left holding the bag. Anytime you give your financial information to others you also face the possibility of becoming and identity theft victim
5) Especially For You! The Internal Revenue Service today urged everyone to be on alert for scammers using fake charities to dupe taxpayers, especially following major disasters. Scams requesting donations are especially common over the phone, as well as by email and texts. Taxpayers should never feel pressured to give immediately, and they should look to recognized, established charities to help victims.
6) For Taxpayers! The Internal Revenue Service also cautions taxpayers to watch out for unscrupulous tax return preparers. Common warning signs include charging a fee based on the size of the refund, tax preparers who refuse to sign the tax return, or ask people to sign a blank return. One of the simplest ways to find a legitimate Tax professional is that they are required to have an IRS Preparer Tax Identification Number (PTIN) to prepare federal tax returns. The IRS offers resources for taxpayers to educate themselves on types of preparers, representation rights, as well as a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This directory can help taxpayers find a return preparer with specific qualifications to fit their needs.
7) For Internet Users! The IRS also reminds us that taking tax advice from online sources is a slippery slope. Always make sure (as stated above) that your tax information is coming from an accredited source.
8) For Turbo Tax Users! Tax professionals themselves are not immune to scams. Spear-phishing emails, scammers try to steal client data, tax software preparation credentials and tax preparer identities with the goal of getting fraudulent tax refunds. These requests can range from an email that looks like it's from a potential new client to a request targeting payroll and human resource departments asking for sensitive Form W-2 information. The IRS is warning tax professionals about spear-phishing because there is greater potential for harm if the tax preparer has a data breach. And even the big boys are getting in on the action. Turbo Tax just settled a law suit for $141 Million dollars for scamming lower income taxpayers into thinking they were using the IRS Free File website. And it not the first time Turbo Tax has had to settle a law suit for millions for misrepresentations about their tax programs. Fair warning; Turbo Tax has done it before and they will do it again.
9) For Taxpayers that need Help! The Internal Revenue Service today renewed a warning about so-called Offer in Compromise "mills" that often mislead taxpayers into believing they can settle a tax debt for pennies on the dollar. An Offer in Compromise (OIC) is when the taxpayer works with the IRS to settle a tax debt for less than the full amount owed. It is an option for those unable to pay the full tax liability or if doing so creates a financial hardship; meaning that there is a very specific segment of the population that can qualify for an OIC, and, to quote George Carlin, “You’re not in it.” Moreover, anyone claiming they can help you navigate the system to avoid paying your taxes is going to charge an upfront fee for their services. Then they take your money and run, leaving you holding the bag with your full tab still due to the IRS.
10) For Rich Guys! There are also scams, more directed towards the wealthy, that promise ways to funnel money made from sales of property away from the watchful eyes of the IRS.
11) For the Pull a Fast One! It is also tempting to believe that money can be hidden in foreign accounts or trusts. While it is true that you may earn income from foreign accounts, there are very specific regulations as to how this is done. And the IRS has access to banks around the globe.
12) For Just Say No! And I wasn’t kidding when I said I was going to spoil the ending: Tax fraud scheme number twelve is believing that there is an end to these scams and hacks & fishing things, and the many tax fraud schemes that go along with. But, There Isn’t. If anything, the scams are getting better, and more realistic. You can’t be too careful. Sad to say; Trust no one until you know for sure who you are dealing with.
As a taxpayer the most important thing to remember is that you are ultimately responsible for everything that you file, so be careful, be smart, and stay safe, and remember above all: If it seems too good to be true…it is.
