The More You Know: Tax Scam Awareness

According to IRS Commissioner, Chuck Rettig, “We continue to see scam artists use the pandemic to steal money and information from honest taxpayers in a time of crisis… At the IRS, we are dedicated to stopping these criminals, but it’s up to all of us to remain vigilant to protect ourselves and our families.”

Tax scams, both related and unrelated to the pandemic, continue to be an issue. Increasing awareness of potential tax scams is a way to be proactive so that you do not become a victim of a tax scam. This article will discuss specific tax scams for which taxpayers, tax professionals, and financial institutions should be mindful.

Economic Impact Payment Theft remains as people try to steal taxpayer’s stimulus payments. If a stimulus payment is expected to come in the mail, mailbox theft can occur so it is recommended that mail is frequently checked. Since most payments are delivered from the IRS automatically, taxpayers should watch out for mail, emails, phone calls, text messages, or messages through social media that:

·      Direct them to any website other than IRS.gov,

·      Ask for bank account information,

·      Request to click a link to verify data, and/or

·      Inquire about social security numbers or any other information related to Economic Impact Payments.

Unemployment Fraud has increased as a result of the pandemic. If a taxpayer received a Form 1099-G that is reporting tax information that the taxpayer did not receive, they are likely a victim of Unemployment Fraud. A scammer may have stolen personal information that was used to file fraudulent claims for unemployment compensation. The individual was not aware because the compensation went to the scammer. For tax purposes, it is recommended that victims of Unemployment Fraud contact their state agency for a correct form. More information about Unemployment Fraud can be found at this link.

Senior and Immigrant Fraud can occur when a scammer contacts a senior citizen or someone with limited English proficiency while impersonating someone from the IRS to request financial or personal information. Since this type of fraud is often accompanied by some sort of threat, the scammers are often taken more seriously by these groups of people in particular. The IRS typically contacts individuals through the mail instead of via the phone and does not use scare tactics. Form 1040SR has been designed for seniors born before January 2, 1956. Taxpayers can use Schedule LEP to select the language in which to communicate.

Fake charities and organizations are being set up by scammers to request donations for disaster relief, aid for the COVID-19 pandemic, etc. It is important to research unknown charities before making a donation, and especially if a donation is requested over the phone. Deductions are given for donations to qualified charities, which can be found by using the IRS Tax Exempt Organization Search Tool. After researching the charity, taxpayers who choose to make a donation should always request the exact name of the organization, mailing address, and website. Donations should be made with a credit card or check, and never with a gift card or wire transfer.

“Ghost Preparers” are tax professionals who prepare the tax returns but refuse to sign the return as the paid preparer. If someone is being paid to prepare a tax return, they should have a Preparer Tax Identification Number (PTIN.) A typical scam with ghost preparers is that they promise a big refund and charge a cash-only fee based on this refund. The refund may be fraudulently determined using invented income to qualify for tax credits, fake deductions, or incorrect banking information so the refund is deposited into the preparer’s account instead of the taxpayer’s account. Research your tax professional and click here for a Directory of Federal Tax Return Preparers.  

Protection for Taxpayers

Here are some things that taxpayers can do to prevent tax scams and tax fraud: 

1.    The IRS has made Identity Protection Pins (IP Pins) available for ALL taxpayers. An IP Pin locks a tax account with a six-digit code that is only shared with the taxpayer and IRS. If an electronic tax return does not contain the IP Pin, it will be rejected. Click here for more information about IP Pins.

2.    Utilize multi-factor authentication with online tax filing software programs to help protect online accounts. Along with the correct username and password, a security code will be sent to the mobile phone associated with the account.

3.    Strengthen passwords to keep accounts more secure. Some companies are instituting stronger password requirements, so taxpayers may be directed to update their password to meet these protocols.

Questions?

If you have questions about tax scams or tax fraud, you are always welcome to email me and I also recommend checking IRS.gov.