IRS Unveils the Dirty Dozen List of Scams for 2020
Each year the IRS issues a list of tax scams which target taxpayers. The IRS has just issued its list for 2020. The purpose of the list is to raise awareness and to urge taxpayers to be on the lookout for the scams. Although I have, in the past, sent out newsletters about scams, it is important to be reminded so that you do not fall prey to fraudulent schemes.
UNSCRUPULOUS RETURN PREPARERS
Beware of “ghost” preparers. These preparers do not sign the tax return, but will print the return and have the taxpayer 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.
These unscrupulous preparers expose the taxpayer to serious filing mistakes as well as possible tax fraud and risk of losing their refunds. They sometimes target taxpayers who do not have a filing requirement, promise inflated refunds without looking at the taxpayer’s records or claim fake tax credits such as the education or earned income credit. Some will have taxpayers sign blank returns or charge fees based on a percentage of the refund. Regardless of who prepares the return, the taxpayer is ultimately responsible for the accuracy of the return.
OFFER IN COMPROMISE MILLS
You see them advertised on television, and hear them on radio ads. They promise to settle tax debts for pennies on the dollar. While it is true that the IRS may settle a tax debt for less than is owed, there are specific qualification requirements which these companies do not explain. The IRS considers these a scam and refers to them as “OIC mills”. These unscrupulous outfits collect large fees from taxpayers who are unlikely to qualify for relief, mislead taxpayers and exaggerate the chances of settling tax debts.
PAYROLL AND HR SCAMS
With many businesses closed and employees working from home due to COVID-19, employers need to be on guard against phishing scams designed to steal W-2s and other tax information. Currently the most common of these scams are the gift card scheme and the direct deposit scheme. In the past these scams included requests for wire transfers, and payment of fake invoices.
In the gift card scheme a compromised e-mail account is used to send a request to purchase gift cards. In the direct deposit scheme, the scammer will have access to the target’s e-mail account. The scammer will impersonate the target employee and send an e-mail to the employer requesting a change to their direct deposit information to an account controlled by the scammer.
The direct deposit scam and any scam involving business e-mail compromise/spoofing should be reported to the FBI Internet Complaint Center at https://www.ic3.gov/default.aspx. The IRS requests that W-2 scams be reported to them at email@example.com.
I have said numerous times that the IRS will never e-mail you. Delete any e-mail which claims to be from the IRS. Should you open such an e-mail, do no click on any links in the e-mail. The IRS Criminal Division has seen a tremendous increase in phishing schemes using “coronavirus”, “COVID-19” and “stimulus” as keywords. Do not visit or click on any websites
Scammers are using the unemployment crisis and the COVID-19 pandemic to set up fake charities to steal from those who try to help others in time of need. The schemes generally start with an unsolicited contact by telephone, text, social media, e-mail or in person solicitation. The scammer may use a name similar to a legitimate charity. Always ask for a federal identification number (EIN) for the charity and then search the IRS website to make sure it is a legitimate charity. You can search for charities here https://apps.irs.gov/app/eos/
THREATENING IMPERSONATOR PHONE CALLS
The phone calls threatening taxpayers with arrest, deportation or license revocation if the taxpayer does not pay delinquent taxes remain common. Recent scams involve phone calls regarding unexpected refunds and stimulus payments. None of these calls are coming from the IRS. Remember, the IRS will not call you about your tax situation unless you are already dealing with an IRS employee on a matter.
SOCIAL MEDIA SCAMS
The principal element of a social media scam is convincing you that you are dealing with a person close to you, and whose message via email, text or other social media you trust. The scammer may include a link to something of interest to you which contains malware intended to commit more crimes. Scammers also infiltrate your email and cell phone to go after friends and family with fake emails that appear to be real, and text messages soliciting donations to fake charities. Social media scams have also led to tax-related identity theft.
STIMULUS PAYMENT OR REFUND THEFT
The refund theft scam involves criminals who file false returns or supply false information to the IRS to divert refunds to wrong addresses or bank accounts to which the scammer has access. The IRS has made significant progress in combatting this type of scam, but it does continue to be a threat. This year scammers have turned their attention to stealing the stimulus payment. One scam has involved taking advantage of vulnerable populations, especially the elderly and those in care facilities. See https://magdaabdogomezlaw.com/scams-involving-stimulus-payment/ and https://magdaabdogomezlaw.com/going-irs-covid-pandemic/
FAKE PAYMENTS WITH REPAYMENT DEMANDS
In a twist to the above scam, a scammer who has obtained a taxpayer’s personal information will file a fraudulent tax return claiming a refund and will have the refund directly deposited into the taxpayer’s bank account. When the refund is deposited the scammer contacts the taxpayer claiming to be an IRS employee and advises the taxpayer that the IRS has issued an erroneous refund. The scammer will demand that the refund be returned immediately to avoid penalties and interest. Generally, the scammer will request that the taxpayer buy specific gift cards for the amount of the refund. Be aware that the IRS will never demand payment of taxes through a specific method and, most definitely, not through gift cards.
FRAUD AGAINST SENIORS
Senior citizens are more likely to be targeted by scammers. Seniors are becoming more comfortable with new technologies, such as social media, providing scammers another means of taking advantage of them. Phishing scams linked to Covid-19 have been a major threat this filing season. Seniors need to be alert for a continuing surge of fake emails, text messages, websites and social media attempts to steal personal information.
SCAMS TARGETING NON-ENGLISH SPEAKERS
Phone scams pose a major threat to people with limited access to information, and those not proficient with the English language. These calls are frequently robocalls, but in some cases may be made by a real person. The scammers may have some of the taxpayer’s information making the phone calls seem legitimate. These scams are often threatening in nature.
This is a growing cybercrime. The malware is often inadvertently downloaded by the user. Once the computer is infected the ransomware locks critical data on the computer with its own encryption. Victims of this type of attack will receive a ransom request when they try to access the data. Ransom is usually requested in virtual currency. Many of the scams detailed here may result in a victim opening a link or attachment which contains ransomware.
We must remain ever vigilant to cyber criminals and scammers. They seem to get more sophisticated each day, but we can protect ourselves by staying informed.