Tax Scam Awareness: The “Dirty Dozen” Tax Scams For 2020

During tax season, criminals/scammers are in rare form trying to prey on us. For many people, tax filing is already stressful for various reasons.  This tax season, in particular, tax filers are also coping with monetary stress on an unprecedented level due to COVID-19-related problems. 

Because of this, scammers try to take advantage of anxious, weary, and scared individuals.  Also, with EIP (Economic Impact Payments) about to roll out, these thieves try various techniques for “re-routing” money from unsuspecting people.

The IRS lists its annual “Dirty Dozen” tax scams to help us protect ourselves. Being aware of these schemes can help you protect yourself and your loved ones against fraud and learn some best practices to take.  Many tax scams involve some form of identity theft.

Following is the IRS’ list of the top “Dirty Dozen” scams to be aware of during this year’s tax filing season:

“Phishing”: We should be aware of potentially fake emails and websites looking to steal our personal information. The IRS will never contact us via email about a tax bill, refund or Economic Impact Payments.

Do not click on any links claiming to be from the IRS! Be cautious of emails and websites − they may be nothing more than scams to steal personal information. When in doubt – DELETE!

Fake Charities: Scammers frequently exploit natural disasters and other situations such as the current COVID-19 pandemic by setting up fake charities to steal from generous, well-meaning people trying to help others in times of need. Unfortunately, charity scams generally rise during times of social and economic upheaval.

Threatening Impersonator Phone Calls: A common, year-round phone scam called “vishing” (voice phishing) relies on fear by making bogus threatening phone calls from a scammer claiming to be with the IRS. The IRS will never threaten a taxpayer or surprise him or her with a demand for immediate payment, deportation, or arrest.

Social Media Scams: Using personal information (unfortunately taken from people’s personal data listed on social media accounts!), a scammer emails a potential victim something of interest to the recipient. The email’s content contains a link to malware that’s intended to commit more crimes. Scammers also infiltrate their victim’s emails and cell phones to go after their friends and family with bogus emails appearing to be real, and text messages asking for donations to fake charities that are appealing to the victims.

EIP (Economic Impact Payments) or Refund Theft: Scammers also turned their attention this year to stealing Economic Impact Payments as provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Scammers rely heavily on identity theft by filing false tax returns or by providing other bogus information to the IRS to divert refunds to wrong addresses or bank accounts.

Senior Fraud: Personally, I find this scam particularly disgusting. Having worked with seniors before, I feel that there’s an “extra special” place in hell for anyone abusing one of our most vulnerable populations. Seniors are more likely to be targeted and victimized by scammers, and general financial abuse of seniors happens in personal and professional relationships as well. Seniors and their friends, family, and caregivers need to be alert for bogus emails, phone calls, text messages, websites and social media attempts to steal personal information.

Scams Targeting Non-English Speakers: Another particularly detestable scam operation. The scammer preys upon taxpayers that may be somewhat uncomfortable with the English language. They (the scammer) may have gotten information about the taxpayer’s personal information, which might make the taxpayer think that the scammer is really from the IRS. The IRS impersonator calls a taxpayer threatening jail time, deportation or revocation of a driver’s license. In particular, taxpayers who are recent immigrants often are the most vulnerable.

Unscrupulous (Tax) Return Preparers: Most tax professionals provide honest, high-quality service, but dishonest preparers show up every year committing fraud. So-called “ghost” tax preparers expose their clients to serious filing mistakes, possible tax fraud, and the loss of tax refunds. Unfortunately, many tax professionals have been impacted by COVID-19. While many of the effected tax preparers are honest and have to work remotely, dishonest preparers may look to advertising on the Internet more as their excuse for not having a legitimate office/business. Be careful in selecting a credible tax preparer.

Offer in Compromise (OIC) Mills: We need to be extra cautious of misleading tax debt resolution companies that can exaggerate chances to settle tax debts for “pennies on the dollar” through something called an Offer in Compromise (OIC). These unethical companies (“OIC mills”) oversell the program to unqualified candidates to collect a large fee from taxpayers already struggling with debt.

The IRS has a free online Offer in Compromise Pre-Qualifier tool to let you see if you qualify. The simple tool allows you to confirm your eligibility, and provides an estimated offer amount.

Fake Payments with Repayment Demands: The scammer has stolen a taxpayer’s personal information. They then put a bogus refund into the taxpayer’s financial account.

Impersonating an IRS employee, they tell the taxpayer that the money was erroneously put into their account, and that the IRS needs to be paid back…in gift cards! Unfortunately, innocent taxpayers have fallen for this fraud.

Payroll and H.R. (Human Resources) Scams: Business owners, tax professionals, and taxpayers need to keep a lookout against phishing to steal W-2 Forms and any other tax information. These frauds are called Business Email Compromise (BEC) or Business Email Spoofing (BES). This is even more prevalent now with many businesses closed and their employees working from home due to COVID-19. One of the most common scams is the direct deposit scam.

 In this scheme, the scammer has illegally obtained access to the victim’s email account (also known as an email account compromise or “EAC”). Then, they impersonate the potential victim to have the victim’s place of employment change the employee’s direct deposit information to reroute their deposit to an account of the scammer.

Ransomware: Ransomware is malware to infect a potential victim’s computer, network, or server. Malware is a form of invasive software that is often frequently inadvertently downloaded by the user. Once downloaded, it tracks your keystrokes and other computer activity for personal information.

Victims usually aren’t aware of the attack until they try to access their data (and can’t), or they receive a ransom request (for money) in the form of a pop-up window. Sometimes, phishing email is used to trick a you into opening a link or attachment containing the ransomware. Again, to protect yourself, do not open and delete any email that is suspicious, and especially from an unknown .person or entity! Namecheap.com has a blog post that deals with what to do if you are targeted by ransomware.

For tax professionals, a free, multi-factor authentication feature is being offered on tax preparation software products. Apps are available through Google Play or Apple’s App Store, per the IRS’ website information.

I hope this post has helped you to not be afraid, but to be more educated and aware of scammers and their schemes not only during tax season, but all year long. Stay smart to live an abundant life!

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