IRS Rolls Out List of ‘Dirty Dozen’ Tax Scams

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Ken Berry
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With tax return season in full swing, the IRS began releasing its annual list of the “Dirty Dozen” tax scams on Feb. 1, providing details on one scam each business day.

Following is a summary of the first six scams in the Dirty Dozen list:

1. Phishing. At the top of the list, the IRS is warning taxpayers to watch out for fake emails or websites looking to steal personal information. New and evolving phishing schemes have already been seen this month, as scam artists work to confuse taxpayers during filing season. These schemes also have targeted tax professionals, payroll and human resources personnel, and schools.

“These email schemes can fool even the most cautious person. Email messages can look like they come from the IRS or others in the tax community,” IRS Commissioner John Koskinen said in a written statement. “Taxpayers should avoid opening surprise emails or clicking on web links claiming to be from the IRS. Don’t be fooled by unexpected emails about big refunds, tax bills, or requesting personal information. That’s not how the IRS communicates with taxpayers.”

In these email scams, criminals pose as a person or organization the taxpayer trusts or recognizes, such as a bank, credit card company, tax software provider, or government agency. They go to great lengths to create websites that appear legitimate, but contain phony login pages. Then the crooks use the information for illegal means, such as filing fraudulent tax returns.

2. Phone scams. Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers.

Typically, scammers make unsolicited calls claiming to be IRS officials and demand that the victim pay a bogus tax bill. They con the person into sending cash, usually through a wire transfer or a prepaid debit card or gift card, like an iTunes card. The scammers may also leave urgent callback requests through phone “robo-calls” or phishing emails.

Phone scammers frequently rely on threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport, or revoke the driver’s license of their victim if they don’t get the money.

Taxpayers are urged to contact the IRS right away if they receive one of these calls.

3. Identity theft. Tax-related identity theft – with its related scams to steal personal and financial data from taxpayers or data held by tax professionals – remains a top item on the Dirty Dozen list, even though progress is being made.

Identity theft occurs when someone uses a stolen Social Security number or Individual Taxpayer Identification Number to file a tax return claiming a fraudulent refund.

The IRS, state tax agencies, and the tax industry, working together as the Security Summit, have enacted a series of safeguards that are showing results. In 2016, the number of taxpayers reporting stolen identities on federal tax returns declined by more than 50 percent, with nearly 275,000 fewer victims compared to a year ago, according to the IRS.

4. Return preparer fraud. The vast majority of tax professionals provide honest, high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft, and other scams that hurt taxpayers.

It’s important to choose carefully when hiring an individual or firm to prepare a tax return. Taxpayers can be misled by preparers who don’t understand taxes or who persuade people into taking credits or deductions they aren’t entitled to in order to increase their fee.

Every year, these types of tax preparers face penalties and/or jail time for defrauding their clients.

5. Fake charities. Phony charities set up to steal money or personal information are a recurring problem, so the IRS advises taxpayers to research organizations before donating their hard-earned money.

The agency cautions taxpayers to be wary of charities with names similar to nationally known organizations. For security and tax record purposes, taxpayers should contribute by check, credit card, or another way that documents the gift.

Another long-standing type of fraud involves scams that occur after significant natural disasters. It’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and obtain tax refunds.

6. Falsely inflated refund claims. Scam artists pose as tax preparers, luring victims by promising large tax refunds. They use flyers, advertisements, phony storefronts, or word of mouth to attract victims. They may even make presentations through community groups or churches.

Criminals frequently prey on people who don’t have a filing requirement, such as those with low income or the elderly, and non-English speakers.

Criminals also may victimize taxpayers who are due a refund by promising larger refunds based on fake Social Security benefits and false claims for education credits or the Earned Income Tax Credit, among others.

We will present the remainder of the Dirty Dozen tax scams the week of Feb. 20.

Related articles:

W-2 Phishing Scam Becoming More Dangerous, IRS Says
IRS Alerts Tax Professionals About New Email Scam


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