The “Dirty Dozen”: IRS issues yearly list of tax scams that taxpayers may encounter this year
On July 16, 2020, the IRS released its annual list of tax scams, known as the “Dirty Dozen” highlighting scams that taxpayers and tax professionals should be aware of in 2020.
This year’s “Dirty Dozen” list includes:
- Phishing Scams. Phishing scams are designed to steal personal information. The IRS says taxpayers should be on alert to potential fake emails or websites looking to steal personal information. The IRS will never contract taxpayers via email about a tax bill, refund, or Economic Impact Payment.
The IRS has seen a tremendous increase in phishing schemes utilizing emails, letters, texts and links. These phishing schemes use keywords such as “coronavirus, “COVID-19” and “Stimulus” in various ways.
- Fake Charities. Criminals frequently exploit natural disasters and other situations, such as the current COVID-19 pandemic, by setting up fake charities to steal from well-intentioned people trying to help in times of need.
Fake charity schemes normally start with unsolicited contact by telephone, text, social media, e-mail, or in person using a variety of tactics. Bogus websites use names similar to those of legitimate charities to trick people to send money or provide personal financial information. They may even claim to be working for or on behalf of the IRS to help victims file casualty loss claims and get tax refunds. Taxpayers should be particularly wary of charities with names that mimic those of nationally known organizations.
Taxpayers can find legitimate and qualified charities with the search tool on IRS.gov.
- Threatening Impersonator Phone Calls. A common one remains bogus threatening phone calls from a criminal claiming to be with the IRS. The scammer attempts to instill fear and urgency in the potential victim.
The IRS will never demand immediate payment, threaten, ask for financial information over the phone, or call about an unexpected refund or Economic Impact Payment. Taxpayers should contact the real IRS if they worry about having a tax problem.
- Social Media Scams. Taxpayers need to protect themselves against social media scams, which frequently use events like COVID-19 to try tricking people. The basic element of social media scams is convincing a potential victim that he or she is dealing with a person close to them that they trust via email, text or social media messaging. 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.
- Economic Impact Payment or Refund Theft. In addition to stealing tax refunds, this year criminals turned their attention to stealing Economic Impact Payments (“EIPs”). EIPs are one-time payments to taxpayers provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Criminals use stolen information to file false tax returns or supply other bogus information to the IRS to divert refunds to wrong addresses or bank accounts.
The IRS recommends that taxpayers who need assistance getting an EIP consult the Coronavirus Tax Relief page. And taxpayers who believe they may be a victim of identity theft should consult the Taxpayer Guide to Identity Theft.
- Senior Fraud. Senior citizens and those who care about them need to be on alert for tax scams targeting older Americans. Seniors are more likely to be targeted and victimized by scammers than other segments of society. Older Americans' increasing engagement with social media gives scammers another way to engage with seniors. Financial abuse of seniors is a problem among personal and professional relationships. 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.
- Scams Targeting Non-English Speakers. IRS impersonators and other scammers target groups with limited English proficiency. These scams are often threatening in nature. A common IRS impersonation scam involves a taxpayer receiving a telephone call threatening jail time, deportation or revocation of a driver’s license from someone claiming to be with the IRS.
- “Ghost” and Other Bad Return Preparers. “Ghost” return preparers don’t sign the tax returns they prepare. They may print the prepared tax return and tell the taxpayer to sign it and mail it to the IRS or not digitally sign an efiled return as a paid preparer. By law, paid preparers must sign and include their Preparer Tax Identification Number (PTIN) on returns. The IRS warns taxpayers to beware of preparers who promise inflated refunds by claiming fake tax credits, who ask the taxpayer to sign a blank return, promise a big refund before looking at the taxpayer’s records or charge fees based on a percentage of the refund.
- Tax Debt Resolution Companies. The IRS warns taxpayers to beware of tax debt resolution companies that exaggerate their ability to settle tax debts for “pennies on the dollar” through an offer in compromise (OIC). An OIC allows a taxpayer to settle a tax debt for less than the full amount owed; it may be a legitimate option if the taxpayer can't pay the full tax liability or doing so creates a financial hardship. However, as the IRS notes in the Information Release, to qualify for an OIC, taxpayers must meet very specific criteria. The Information Release recommends that taxpayers use the IRS’s free online Offer in Compromise Pre-Qualifier tool to see if they qualify for an offer-in-compromise, and obtain an estimated offer amount, without paying fees to a debt resolution company.
- Fake Payments with Repayment Demands. Here’s how the scam works: 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 scammer calls the taxpayer posing as an IRS employee and asks the taxpayer to return the money via a specific type of gift cards for the amount of the refund. The IRS will never demand payment by a specific method. The IRS recommends that anytime a taxpayer receives an unexpected refund and a call from us out of the blue demanding a refund repayment, they should reach out to their banking institution and to the IRS.
- Payroll and HR Scams. The IRS warns tax professionals, employers and taxpayers to be on guard against phishing designed to steal Form W-2s and other tax information, particularly now with many businesses closed and their employees working from home due to COVID-19. These are Business Email Compromise (BEC) or Business Email Spoofing (BES) scams. Currently, two of the most common types of these scams are the gift card scam and the direct deposit scam.
In the gift card scam, a compromised email account is often used to send a request to purchase gift cards in various denominations.
In the direct deposit scheme, the fraudster may have access to the victim’s email account and impersonate the potential victim to change the victim’s direct deposit information to reroute their deposit to an account the fraudster controls.
The Direct Deposit scam 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: phishing@irs.gov (Subject: W-2 Scam).
- Ransomware. Ransomware is malware that, once downloaded, looks for and locks critical or sensitive data on the victim's computer with its own encryption. In some cases, entire computer networks can be adversely impacted. Scammers may use a phishing email to trick a potential victim into opening a link or attachment containing the ransomware. These emails may include solicitations to support a fake COVID-19 charity or allegedly contain information about Economic Impact Payments. The IRS recommends that taxpayers and tax professionals use the free, multi-factor authentication feature available with their tax preparation software to protect against data thefts. The multi-factor authentication means returning users must enter their username/password credentials plus another data point that only they know, such as a security code sent to their mobile phone.
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