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Tax season is a period of heightened vigilance for taxpayers and businesses alike, as it coincides with an increase in fraudulent activities aimed at stealing sensitive information and money. The Internal Revenue Service (IRS) annually publishes a list known as the "Dirty Dozen," highlighting the top twelve scams taxpayers should be wary of. This year's compilation underscores the evolving nature of phishing and smishing scams, designed to dupe individuals into relinquishing their personal and financial details.
Top Tax Scams
Last year’s tax season saw thousands of fraud attempts and billions of dollars stolen from unsuspecting victims. Here are the most frequent scams you should be aware of this year:
1. Phishing and Smishing
Phishing and smishing scams, involving unsolicited emails and text messages posing as legitimate organizations, are rampant. IRS Commissioner Danny Werfel emphasizes, “Scammers are relentless in their attempts to obtain sensitive financial and personal information, and impersonating the IRS remains a favorite tactic.”
These scammers attempt to lure victims with the promise of nonexistent refunds or threaten them with baseless legal actions. The IRS cautions against clicking on links from these unsolicited messages, which could lead to identity theft or malware installation. “People can be anxious to get the latest information about their refund or other tax issues, so scammers frequently try using the IRS as a way to trick people,” states Werfel.
2. IRS Online Account Scams
Fraudsters have turned their attention to deceiving taxpayers into divulging login details for their IRS online accounts, posing as helpful individuals offering to navigate the setup process. This scam demonstrates the evolving tactics scammers use to steal valuable tax information. Werfel advises, “An Online Account at IRS.gov can help taxpayers view important details about their tax situation. But scammers have realized the sensitive information there is valuable to them.”
3. Misleading Tax Advice on Social Media
The spread of false tax advice on platforms like TikTok has prompted the IRS to issue warnings about scams that could lead to identity theft and severe penalties. Scammers exploit these platforms to disseminate bogus tax tips, including improper form usage to artificially inflate refunds. “Social media is an easy way for scammers and others to try encouraging people to pursue some really bad ideas,” warns Werfel, emphasizing the risks associated with following such misleading guidance.
4. Unclaimed Refund Scams
One particularly effective scam involves sending fake IRS letters about unclaimed refunds. These letters, often appearing legitimate, are designed to phish for personal information, facilitating tax fraud or identity theft. The IRS cautions against being fooled by the official-looking notices, which might contain subtle inaccuracies or outright fabrications meant to deceive the recipients.
5. False Credit Claims: The ERC and Fuel Tax Credits
Business owners beware: the IRS has observed an increase in fraudulent activities surrounding the employee retention credit (ERC), a relief measure designed for businesses impacted during the pandemic. Scammers have been enticing businesses, especially those that do not qualify, to apply for the ERC, either to misappropriate tax information or to profit from hefty application assistance fees.
Similarly, scams involving the fuel tax credit have been on the rise. This credit, intended for specific off-highway business uses, has been the target of scammers misleading taxpayers about eligibility and fabricating documents to support bogus claims. Werfel cautions, “Promoters are pushing the accelerator on bad Fuel Tax Credit claims and driving honest taxpayers to a bad choice.” This serves as a reminder for taxpayers to exercise diligence and seek reputable tax advice before pursuing such credits.
6. Donation and Charity Scams
Scammers also target taxpayers' generosity, setting up fake charities to solicit donations via untraceable methods like gift cards or wire transfers. The IRS urges donors to verify the tax-exempt status of charities through its tools to ensure contributions are going to legitimate organizations, thereby preventing the misuse of their goodwill for fraudulent purposes.
Protect Yourself From Tax Scams
CBS News business analyst Jill Schlesinger offers some advice to safeguard against these scams. The IRS does not initiate contact through social media, text, or email. So, if you are contacted by these means, Schlesinger says it’s time to “put your big defense mechanism up. And also know that they'll only call you if you've actually been notified by mail prior.”
The IRS will not use manipulative tactics such as threatening legal action, guaranteeing refunds, or demanding immediate payments via email, text, or phone calls without prior written notice. Importantly, unlike scammers, the IRS does not request credit or debit card details over the phone. Any such communication should be treated with caution.
Staying vigilant and defensive against scams is essential at this time of year. Avoid sharing sensitive information over unverified channels and be wary of “too-good-to-be-true” offers. If suspicious of a scam, you can report it to the IRS by filling out Form 14242, and contribute to broader efforts to combat tax-related fraud.
Conclusion
As we navigate through tax season, staying informed about the latest scams and adopting cautious practices is imperative. By understanding the tactics employed by fraudsters and taking proactive steps to protect personal and financial information, taxpayers can contribute to a safer tax filing environment, mitigating the risk of falling prey to these deceptive schemes.
Sources
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