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En español | Where there's money, there are scammers who want to take it, and tax scams are a favorite in all the nation's five-star boiler rooms. Here's a look at this year's “Dirty Dozen” tax scams, according to the just-released annual list from the Internal Revenue Service (IRS).
One of the most popular scams is sending out fake emails or setting up fake websites whose purpose is to steal your personal information. Fraudsters always stay current with the news: Lately, many of those so-called phishing attempts use keywords such as “coronavirus,” “COVID-19” and “stimulus.”
The IRS will never initiate contact with you via email about a tax bill, refund or economic impact payments (aka stimulus payments). Don't click on links claiming to be from the IRS. If you have questions about taxes, go directly to the IRS website.
2. Fake charities
Scammers love to prey on kind hearts, and one way to do that is to set up fake charities. The COVID-19 pandemic is a perfect time for these scammers. Fake charity schemes start with unsolicited telephone calls, texts, e-mails or even in-person appeals. And bogus websites use names similar to those of legitimate charities to get people to send money or reveal financial information.
Legitimate charities will provide their employer identification number (EIN), if requested, which can be used to verify their legitimacy. You can find legitimate and qualified charities with this search tool on IRS.gov.
3. Threatening impersonator phone calls
Online impersonation scams are called phishing; voice impersonation is “vishing.” If you get a call from someone claiming to be from the IRS and threatening arrest, deportation or license revocation, you're probably getting vished. The IRS will never demand immediate payment, threaten, ask for financial information over the phone, or call about an unexpected refund or stimulus check. Taxpayers should contact the real IRS if they worry about having a tax problem.
4. Social media scams
That friend on Facebook offering ways to cut your taxes might not really be your friend. Scammers love to impersonate a potential victim's family members, friends or coworkers. A scammer may email a potential victim and include a link to something of interest to the recipient that contains malicious software, or malware. The malware, once unknowingly downloaded, will help the scammer browse your computer for personal information or use your computer to commit more crimes. Scammers also infiltrate cellphones to go after your contacts with text messages soliciting, for example, small donations to fake charities.
5. Stimulus payment/tax refund theft
When criminals steal your identity, they can file false tax returns and collect a nice little refund for themselves — making it harder for you to get yours. If you think you are the victim of identity theft, consult the Taxpayer Guide to Identity Theft on IRS.gov.
Identity thieves and others also steal stimulus payments. People at nursing homes are at particular jeopardy of having their payments taken from them. Stimulus payments generally belong to the recipients, not the organizations providing the care. These payments do not count as a resource for determining eligibility for Medicaid and other federal programs. They also do not count as income in determining eligibility for these programs. Check the Coronavirus Tax Relief page of IRS.gov for assistance with your stimulus payment.
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6. Senior fraud
Seniors and those who care about them need to be on alert for tax scams targeting older Americans, who are becoming more comfortable with evolving technologies, such as social media. Unfortunately, that gives scammers another means of taking advantage. The likelihood of fraud diminishes when an older person has trusted friends or family members taking an interest in their activities — online and off — and helping monitor their affairs.
7. Scams targeting non-English speakers
Phone scams pose a major threat to people with limited access to information, including individuals not entirely comfortable with the English language. Con artists may have some of your information, including your address, the last four digits of your Social Security number or other personal details — making the phone calls seem more legitimate.
A common ploy used by scammers against nonnative speakers is the IRS impersonation scam, in which a taxpayer receives a telephone call threatening jail time, deportation or revocation of a driver's license from someone claiming to be with the IRS. Ignore these calls. The IRS won't phone you with threats of this nature.
8. Unscrupulous tax return preparers
Beware so-called “ghost” preparers who expose clients to potentially serious filing mistakes as well as possible tax fraud and risk of losing their refunds. You can spot these ghost preparers because they don't sign the tax returns they prepare. They may instead print the tax return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost preparer will prepare but not digitally sign as the paid preparer. By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a preparer tax identification number (PTIN). Paid preparers must sign and include their PTIN on returns.
Unscrupulous preparers may also target those without a filing requirement and who may or may not be due a refund. They promise inflated refunds by claiming fake tax credits, including education credits, the earned income tax credit (EITC) and others. Avoid preparers who ask you to sign a blank return, promise a big refund before looking at your records or charge fees based on a percentage of the refund.
You are ultimately responsible for the accuracy of your tax return, regardless of who prepares it. Taxpayers can go to a special page on IRS.gov for tips on choosing a preparer.
9. 'Offer in Compromise’ mills
Be wary of misleading tax debt resolution companies that exaggerate chances to settle tax debts for “pennies on the dollar” through an Offer in Compromise (OIC). These offers are available for taxpayers who meet very specific criteria under law to qualify for reducing their tax bill. But unscrupulous companies oversell the program to unqualified candidates so they can collect a hefty fee from people already struggling with debt.
Although the OIC program helps thousands of people each year reduce their tax debt, not everyone qualifies for an OIC. In fiscal year 2019, 54,000 OICs were submitted to the IRS. The agency accepted 18,000 of them. Use the online OIC Pre-Qualifier tool to see if you qualify.
10. Tax refund repayment demands
Criminals are always finding new ways to trick taxpayers into believing a scam, including putting a real tax refund into a taxpayer's actual bank account, then asking for it back. Here's how the scam works:
A con artist steals or obtains your personal data including Social Security number or individual taxpayer identification number (ITIN) and bank account information. The scammer files a bogus tax return in your name and has the refund deposited into your checking or savings account. Once the direct deposit hits your bank account, the fraudster calls you, posing as an IRS employee. The scammer tells you that there's been an error and that the IRS needs the money returned immediately or penalties and interest will result. The scammer tells you to buy specific gift cards for the amount of the refund.
The IRS will never demand payment by gift card. If you receive an unexpected refund, talk to your bank and the IRS.
11. Payroll and HR scams
A scammer may hack or spoof an e-mail account from someone at your workplace, so a request you receive by email will appear as if it is legitimate. In a gift card scam, a compromised email account is often used to send a request to an employee to purchase gift cards in various denominations. In a direct deposit scheme, the fraudster may impersonate you to have your employer change your direct deposit information to reroute your paycheck to an account the fraudster controls. Independently confirm such requests with the right person at your company, especially if the request comes out of the blue or seems unusual in nature.
Ransomware is malware that infects a potential victim's computer, network or server. Once downloaded, ransomware looks for and locks critical or sensitive data with its own encryption. In some cases, it can take over entire computer networks. Victims generally aren't aware of the attack until they try to access their data, or they receive a ransom request in the form of a pop-up window on their computer screen. Payment in virtual currency such as Bitcoin is often demanded to unlock the data being held hostage. Beware phishing emails and bogus websites that could harbor downloadable ransomware.