Tax scams can happen at any time throughout the year, but tend to rise during tax season and during times of crisis. Considering these two stressors are coinciding this year, it is even more important for taxpayers to be aware of possible fraud. The following “dirty dozen” list is published by the IRS every year to let taxpayers know what to lookout for and avoid, in an effort to prevent fraudsters from stealing private information and money.

Phishing: Phishing scams are when scammers target someone by using fake emails, texts, or websites in order to steal user information like passwords, bank account details, or other personal information. There has been an increase in schemes using the words “COVID-19” and “stimulus” to play on the fear of taxpayers. The IRS will never contact a taxpayer via email about a bill, refund or Economic Impact Payments, so it is important not to click on links claiming to be the IRS.

Fake Charities: Scammers tend to exploit the sympathy of taxpayers by forming fake charities. This is to steal money from those trying to help others in need during natural disasters or the current pandemic. The fake charity may have a similar name to a real charity making it sound more legitimate, or could claim to be working on behalf of the IRS to help taxpayers file casualty loss claims. IRS.gov has a search tool that taxpayers can use to verify qualified and authentic charities.

Threatening Impersonator Phone Calls: A common threat to taxpayers remains phone calls from people pretending to be IRS agents, using fear and urgency to get information. Theses phone scams may take the form of robocalls, which is a text to voice prerecorded message with instructions to call back, or may be a real person. The IRS will not demand payment, threaten arrest or deportation, or ask for financial information over the phone. If you receive one of these calls, you should report it to the IRS at 1-800-829-1040.

Social Media Scams: Social media allows anyone to share personal information with anyone else on the internet. Scammers then use that information to impersonate family, friends, or co-workers. These scams can also lead to identity theft by convincing the taxpayer that they are dealing with someone they know, leading them to click on malicious links. Should you receive a suspicious message, try contacting the person directly to verify the message is actually from them.

EIP or Refund Theft: Criminals will try to steal refunds and Economic Impact Payments (EIPs) provided by the CARES Act. This tends to stem from scammers filing false tax returns to redirect funds to different bank accounts. It is important to note that EIPs belong to the recipient, not an organization like a nursing home, and the payments do not count towards determining eligibility for Medicaid, other federal programs, as income. If you believe you have been the victim of identity theft, or if you want assistance in getting your Economic Impact Payment, those resources can be found at IRS.gov.

Senior Fraud: Senior citizens are more likely to be targeted than other sections of society, and the IRS recognizes the prevalence of this fraud. However, senior fraud does appear to go down when a trusted family member or friend is involved in their affairs. As seniors get more comfortable with technology, they should also be aware of fake emails, texts or calls, and websites attempting to steal information, specifically scams relating to COVID-19.

Scams Targeting Non-English Speakers: IRS impersonators target groups with limited English proficiency and are often threatening. A robocall or a call from a real person having some of the taxpayer’s information makes the call seem more legitimate. Taxpayers who are recent immigrants should ignore threats of jail time, deportation, or revocation of their driver’s license and not engage with the caller.

Unscrupulous Return Preparers: The majority of tax professionals provide honest and high quality service. Unfortunately, dishonest preparers arise every filing season attempting to harm taxpayers. They might target those without a filing requirement and promise a large refund by claiming fake tax credits. Taxpayers should also avoid “ghost” preparers; those that expose their clients to filing mistakes and do not sign the return, even though preparers are required by law to do so. It is important to remember that as the taxpayer, you are ultimately responsible for the completeness and accuracy of your tax return, regardless of who prepares it.

Offer in Compromise Mills: There are ways for taxpayers meeting very specific criteria to reduce their tax bill, but tax debt resolution companies exaggerate their claims and target unqualified candidates to claim a large fee from those already struggling with debt. In 2019, there were 54,000 applications submitted, but only 18,000 accepted. The free online Offer in Compromise (OIC) Pre-Qualifier tool can be used to see if you are eligible and provides an estimated offer amount. If eligible, a taxpayer can apply for OIC themselves. Should help be required, the taxpayer should be careful about the representation they hire.

Fake Payments with Repayment Demands: A scammer that obtains a taxpayer’s Social Security number and bank account information may file a fake tax return and have the refund deposited into the taxpayer’s account. Then the scammer will call the person, claiming to be an IRS agent and that an error has occurred, demanding the money needs to be returned through gift cards. The IRS will not demand a specific payment method and the taxpayer has the right to question the amount owed. If you receive an unexpected refund or a call for repayment, you should reach out to your bank and the IRS.

Payroll and HR Scams: With some businesses closed and employees working from home, two common scams on the rise are gift card and direct deposit scams. In a gift card scam, a fake email posing as a co-worker is used to request the purchase of gift cards and to send the gift card information back. In a direct deposit scam, the fraudster may have access to the victim’s email and will request the direct deposit information to be changed to the fraudster’s account. When these dubious messages are received, try reaching out to the person in another way to confirm the information with them first.

Ransomware: Ransomware is a type of cybercrime that involves invasive software accidentally being downloaded that prevents the user from accessing their files or data, and payment is demanded in order to regain access. This scam may use other scams to gain access; for example it may start with a phishing email that tries to trick the taxpayer into opening an attachment containing the ransomware or an email including links to support a coronavirus charity. This scam relies on human error or system vulnerabilities, so taxpayers should be cautious about what they are opening.

The IRS and state governments have continued to make strides in their efforts to protect taxpayers and pursue criminals trying to steal your money or information. Nevertheless, it is important for all taxpayers to be aware of common scams used because it has not stopped scammers from trying to obtain taxpayer information or file fraudulent returns. It is more important than ever to take precautions in order to keep your information safe. Be on the lookup for pandemic related scams now and in the aftermath of the virus. If you have any questions or concerns about tax scams, please do not hesitate to contact a trusted Dermody, Burke and Brown tax advisor.

The information reflected in this article was current at the time of publication.  This article will not be modified or updated for any subsequent tax law changes, if any.