IRS Tax Scams: 12 Methods Tax Scammers Use That You Should be Aware of

July 19, 2021 By David Cash

The new IRS Dirty Dozen of tax scams and rip-offs is very broad, but it provides all of us with some good reminders. Some warnings are about familiar faces, such as ghost preparers who don’t sign returns, while other scams involve devices from simple robocalls to sophisticated financial arrangements.

IRS Tax Scams 12 Methods Tax Scammers Use That You Should be Aware Of

And what a busy year to be a crook when it came to tax info! During 2020, almost 400 “vishing” or “voice phishing” scams were reported, for instance, up 14% from the prior year, and tax lien-related scams nearly doubled. Perhaps as a result of the virus and many people working from home.

Here are 12 of last year’s dirtiest tax scams, according to the IRS.

 

1. Stealing stimulus payments

ID thieves had a big year trying to steal Economic Impact Payments. As with the rich tapestry of other scams through the years, taxpayers should watch for text messages or random calls or emails inquiring about bank account information or requesting that recipients click a link or verify data.

 

2. Impersonating the Unemployed

The pandemic threw millions into joblessness, and scammers took advantage by filing fraudulent claims for unemployment compensation using the stolen personal information of individuals who had not filed claims. A big tipoff for taken taxpayers: a 1099-G reporting compensation they didn’t receive. Unemployment fraud also often involved individuals acting with or against employers and financial institutions to swipe state and local assistance.

 

3. Phish Tales

Filing season remains a special time of year for phishing scams, targeting individuals with communications appearing to come from legitimate sources to net personal and financial data. Scams also aim to infect devices by convincing victims to download programs that silently mine data. Cybercriminals usually send phishing communications by email and use text or social media posts or messages.

 

4. Aiming at Tax Pros

Tax professionals have reported receiving scam emails from the fictitious “IRS Tax E-Filing” phishing scams that purport to involve verification of EFINs (electronic filing numbers) and CAF numbers (identifying numbers of preparers that can represent clients in front of the IRS). The IRS has also seen an increase in offers to buy and sell EFINs and CAFs.

 

5. Clients as Bait

The “New Client” scam continues to be a phishing favorite targeting tax pros. For example, “I just moved here. I have an urgent tax issue, and I was hoping you could help. I hope you are taking on new clients.” Coming in many variations, these emails might say one attachment is an IRS notice, and the other is the prospective client’s prior-year tax return.  Many practitioners at CMP have seen these. Fortunately, we don’t click on any attachments that we aren’t expecting.

 

6. Making Vishes Come True

The IRS reports increased voice-related phishing, or “vishing,” particularly with scams related to federal tax liens. As you’d expect, these unexpected calls ask for personal financial information. (Experts recommend asking questions of the caller but not providing any personal information. Not to mention hanging up immediately.)  The IRS will rarely call you, and you can call your accountant CMP if you think you may have a federal tax lien, and we can help with that.  You should also be able to contact your county assessor to find out of any liens on your property.

 

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7. Just Plain Anti-Social

Social media enables the unscrupulous to lurk on accounts and extract personal info to use against victims. Emails often impersonate the victim’s family, friends, or co-workers and hinge on events like the COVID pandemic. These rip-offs have also led to tax-related ID theft.

 

8. Ransomware

Recent news is full of tales of ransomware, malware designed to block access to a computer system or data until the victim pays for release. Crooks might also threaten to publish sensitive files belonging to the victims. In addition, attacks continue to rise across various sectors. (You’ve probably heard of Colonial Pipeline and software supplier Kaseya, for instance.)

 

9. Tragedies

Scammers love fake nonprofit organizations — and the soil was fertile in the past year with tragedies, disasters, and the pandemic. Scams requesting donations for disaster relief efforts were prevalent over the phone.

 

10. ‘This is the IRS’

IRS impersonators and other scammers are known to target and threaten groups with limited English proficiency, as well as senior citizens. Though it’s diminished recently, IRS impersonation remains common, where a taxpayer receives a call threatening jail, deportation, or revocation of a driver’s license from someone claiming to be with the agency.  But, again, the IRS will rarely call you.

 

11. Offer In Compromise

Offer in compromise mills contorts the IRS program into something it’s not, misleading victims who have no chance of meeting actual OIC requirements while charging sky-high fees.

 

12. Abusive arrangements

Promoters peddle false hopes of large deductions from abusive arrangements, charging a fortune and offering phony claims of legitimacy. Arrangements include syndicated conservation easements twisted through the tax law; micro-captive structures lacking many attributes of insurance; scummy interpretation of the U.S.-Malta Income Tax Treaty; improper R&D credit claims; and abusive shelters of monetized installment sales.

It is important to be aware of the many different ways tax scams can occur. If you have any concerns about your situation or would like additional assistance with preparing your income taxes this year, please don't hesitate to contact us! We want to make sure that everyone gets their money back from these scammers and prepares themselves properly for next year's filing season.

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