Each year, the IRS publishes its “Dirty Dozen” tax scams, which is essentially a list of the biggest, most widespread tax-related scams. Typically, the lion’s share of the “Dirty Dozen” consists of schemes perpetrated by individuals and businesses trying to scam the IRS by way of abusive tax shelters, hiding money offshore, padding deductions on tax returns, claiming credits to which the taxpayer is not entitled, and the like.
This year’s “Dirty Dozen” list, however, has an alarmingly high number of scams where fraudsters are targeting innocent taxpayers. Moreover, the IRS reports that phishing and malware incidents have increased by approximately 400% this tax season alone. Yikes!
IRS Dirty Dozen List of the Most Common Tax Scams
Here’s how to protect yourself from the portion of this year’s “Dirty Dozen” that is aimed at you: the innocent, law-abiding taxpayer.
The Scam: Fraudsters use your social security number to file a return and claim a fraudulent refund.
The Defense: This is a tough one. If someone gets a hold of your social security number and files a return before you do, there is little you can do until after the fact. Take precautions to protect your social security number and file your return as early as you can. If you learn that you’ve been a victim of this scam, follow the instructions found here.
PHONE TAX SCAMS
The Scam: A crook impersonating an IRS agent calls you and threatens arrest, deportation, license revocation or other things if you don’t make a payment immediately.
The Defense: The IRS will not contact you by phone until after they have already notified you of a balance due by mail. They will not ask you for a credit card number over the phone. If you get a call like this, hang up. If you think you actually do owe taxes, call the IRS at (800) 366-4484. If you think it was a scammer who called, fill out the “IRS Impersonation scam” form or call TIGTA at (800) 366-4484. For more info, click here.
The Scam: You get an email or text purporting to come from the IRS and directing you to an official looking website. The website may direct you to enter personal information or may carry malware, which can enable the crooks to acquire your personal information.
The Defense: The IRS will not send you an email about a refund or a balance due out of the blue. If you get an email like this, forward it to firstname.lastname@example.org.
RETURN PREPARER FRAUD
The Scam: Dishonest return preparers set up shop to perpetrate refund fraud, identity theft and other scams.
The Defense: Exercise caution when choosing a return preparer. Find someone who is established and reputable. Do your homework.
INFLATED REFUND CLAIMS
The Scam: Fraudster return preparers use flyers, advertisements, phony storefronts and word of mouth to lure the unsuspecting by promising huge tax refunds. Then, they doctor up the tax return, often using claims for credits to which the victim is not entitled.
The Defense: Same as above.
The Scam: Phony charitable organizations attract donations (not tax-deductible) and may set up fake websites to steal credit card numbers and/or personal information.
The Defense: Beware of charities using names that sound similar to well known charities, and check to be sure the organization is legitimate if it is not a well known charity. If you are unsure of an organization’s legitimacy, check with the BBB Wise Giving Alliance, Charity Navigator or Charity Watch.
FALSIFYING INCOME TO CLAIM CREDITS
The Scam: Crooked tax preparers convince you to falsify your income so that you qualify for the Earned Income Tax Credit. You are likely to wind up with a huge bill for taxes, penalties, and interest, and might even face criminal prosecution.
The Defense: If a return preparer asks you to falsify anything, get a new return preparer. Use the link to the quick reference guide for reporting fraud at the bottom of this article.
ABUSIVE TAX SHELTERS
The Scam: A tax advisor wants to collect a fee from you in exchange for some kind of amazing, complex tax structure which will save you an unbelievable amount of money.
The Defense: If it sounds unbelievable, it very likely is. Get a second opinion from a reputable tax professional.
QUICK REFERENCE GUIDE FOR REPORTING SUSPECTED TAX SCAMS
For a quick reference guide to reporting suspected tax fraud, click here.