IRS: Scammers are ‘relentless’ this tax season

By Jeff Stimpson for Accounting Today

Talk of probationary workers, layoffs and cutbacks may be new, but one annual constant continues this season: tax scams.

The Internal Revenue Service says that from email schemes to misleading tax credits, many of the most popular frauds are robust during the year but peak during filing season.

“Scammers are relentless, and they use the guise of tax season to try tricking taxpayers into falling into a variety of traps. These red flags can lead to everything from identity theft to being misled into claiming tax credits for which they’re not entitled,” said IRS communications senior adviser Terry Lemons in a statement.

Let’s look at the latest in relentless from the IRS’s annual Dirty Dozen.

No Solution: This year’s dozen opens with fake email and texts from entities posing as tax and finance organizations, including the IRS, state tax agencies and tax software companies. The standard phishing email entices victims with a phony refund or threatens criminal charges for tax fraud. Smishing texts or smartphone SMS messages often use such language as, “Your account has now been put on hold” or “Unusual Activity Report,” with a bogus “Solutions” link.

Social Media Advice: Facebook might be great for keeping up with an old crush but it’s a terrible place for tax advice. Bogus or just plain wrong info on social media misleads taxpayers and potentially leads to identity theft and other problems. The IRS cites TikTok as one offending platform, where “wildly inaccurate” tax advice includes urging misuse of common documents like W-2s.

No Accounts: Swindlers can pose as a “helpful” third party to help create a taxpayer’s IRS Individual Online Account — for which no help is needed. Third parties making these offers will try to steal a taxpayer’s personal info to submit bogus returns in the victim’s name.

Fake Charities: Bogus charities are a perennial problem, with scammers setting up fake organizations to steal money and personal information for ID theft. Remind folks that taxpayers who give money or goods to a charity can only claim a deduction if they itemize deductions, and only if the gift goes to a tax-exempt recognized by the IRS.

Gaslighted: A major concern during the past year involved taxpayers being misled into believing they were eligible for the Fuel Tax Credit, which is for off-highway business and farming use and is not available to most taxpayers. Tireless scummy preparers and promoters continue luring taxpayers into inflating refunds by erroneously claiming the credit.

Sick Idea: The Credits for Sick Leave and Family Leave is for the self-employed for 2020 and 2021 and not for later tax years. Nevertheless, the IRS is seeing repeated instances where taxpayers are using a Form 7202 to incorrectly claim a credit based on income earned as an employee and not as a self-employed individual.

Self-Abuse: Social media advice continues to circulate about a non-existent “Self-Employment Tax Credit.” Promoters market it as a way for the self-employed and gig workers to get big payments for the pandemic. Resembling misleading marketing around the Employee Retention Credit, bushwa being circulated suggests many people qualify for the credit and payments of up to $32,000, when they don’t. (The underlying credit referred to in social media is the much more limited Credits for Sick Leave and Family Leave.)

The Butler Did It: Taxpayers invent household employees and then file a Schedule H to claim a refund based on false sick and family medical leave wages never paid.

Just Hold On: This recent scheme circulating on social media encourages people to fill out a W-2 or 1099s with large, made-up income and withholdings as well as fictional employers to supply those figures. Variations on the scheme involve W-2s and W-2Gs, and 1099-R, -NEC, -DIV, -OID and -B, among other forms.

OIC BS: Mills persistently promote pennies-on-the-dollar offers in compromise to people who clearly don’t meet the qualifications, frequently costing taxpayers thousands of dollars. An OIC is, of course, free from the IRS.

Ghost Preparers: Shady tax pros still come with common warning signs, including charging a fee based on the size of the refund or being unwilling to sign the return or provide a PTIN. 

New Tricks: The “new client” scam continues big, where cybercrooks impersonate potential clients to trick tax pros and other businesses into responding to email. Once the tax pro responds, the scammer sends a malicious attachment or URL that can compromise the tax preparer’s system and open sesame to client information.

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