Each year the IRS issues a list of scams it refers to as the Dirty Dozen. The purpose of publishing the list is to protect taxpayers from scams. The IRS continues to see some of the same scams year after year, but it is never a bad idea to be reminded of the threats presented by the scams. The schemes which made this year’s list are:

1. Phishing and smishing: The IRS continues to see texts and emails targeting taxpayers. These unsolicited communications appear as if they are coming from the IRS, state taxing authorities and tax software companies. The purpose of the communications is to lure taxpayers into providing their personal and financial information. These communications take several forms. They may advise the taxpayer that there is an unclaimed refund that needs to be processed or threaten criminal charges for tax fraud. Some will contain language like, “Your account has now been put on hold,” or “Unusual Activity Report” with a bogus “Solutions” link to restore the recipient’s account.

Remember the IRS will never initiate contact through text or e-mail. All initial communications from the IRS will be by  letter sent through the US Postal Service. Stay safe. Do not reply to emails or texts; do not click on any links and do not open any attachments.

2. Bad Social Media Advice: Scammers continue to post incorrect or misleading tax information on social media sites. Some of the advice posted on the social media sites urges taxpayers to misuse common tax forms. Following the erroneous advice can lead to identity theft and tax problems. Filing false tax returns can result in civil and criminal penalties. Obtain tax advice from trusted, reputable and knowledgeable sources instead of social media.

3. Online Accounts: There are scammers who pretend to be a third party and offer a taxpayer help in creating an online account with the IRS. Taxpayers can easily set up an online account with the IRS themselves. It is very simple to do and costs nothing to set up. These scammers are only trying to obtain a taxpayer’s personal information. Many times, the scammers will use the personal information to prepare and file fraudulent tax returns in the taxpayer’s name in order to generate a refund which will be directed to the scammer.

4. Fake Charities: Scammers con taxpayers into contributing to fake charities. Although this scam occurs year-round, it is especially prevalent when a natural disaster occurs. To learn more about this scam refer to: https://magdaabdogomezlaw.com/tips-protecting-making-charitable-contributions/

5. Fuel Tax Credit Claims: In this scam, a third party or an unscrupulous tax return preparer will convince taxpayers that they are eligible for the fuel tax credit. The fuel tax credit is for off-highway business and farming use and is not available to most taxpayers. This scam is also prevalent on social media sites. Before claiming a credit determine the eligibility requirements to see if you are allowed to claim the credit.

6. Credits for Sick Leave and Family Leave: This credit was available to self- employed individuals, not employees, in tax years 2020 and 2021. The IRS continues to see ineligible employees claiming the credit. The truth is most people do not qualify for the credit, yet it is being promoted on social media sites.

7. Bogus Self-Employment Tax Credit: Social media advice and promoters are misleading taxpayers into believing that self-employed and gig workers are entitled to large payments for the COVID pandemic period. Similar to the employee retention credit, taxpayers are led to believe that if they qualify for the credit they are entitled to payments of up to $32,000. There is no such credit. The IRS has announced that it is closely reviewing returns claiming this credit and warns taxpayers of the risk of claiming the credit.

8. Improper Household Employment Taxes: Taxpayers are generating refunds based on a claim of sick and family medical leave wages paid to household employees when they had no household employees. Claiming a refund based on payment to non-existent employees is a fraud and can lead to serious penalties.

9. Overstated Withholding Scam: This is a relatively new scam being promoted on social media. Taxpayers are encouraged to fill out Form W-2 or 1099 forms using the name of a fictional employer and reporting a high amount of false income and withholding taxes. The advice then instructs taxpayers to file a tax return electronically and claim a substantial refund due to the amount reported as having been withheld. The truth is that if the IRS cannot verify the income and withholding reported on the return, it will generally will hold back the refund pending further review of the return.

10. Misleading Offers in Compromise: You have heard the TV and radio commercials of companies promising to settle IRS debt for pennies on the dollar. The IRS has renewed its warning regarding the misleading nature of the promises made by these companies. While a program does exist to reduce tax debt, there are strict requirements for qualification. These companies charge taxpayers excessive fees to represent a taxpayer who often times does not qualify for the program.

11. Ghost Tax Return Preparers: Taxpayers should be careful when hiring a tax return preparer. There are warning signs of which taxpayers should be aware. Stay away from a preparer who refuses to sign the return and include his/her IRS Preparer Tax Identification Number. Learn more about what to look for when hiring a tax return prepared by referring to: https://magdaabdogomezlaw.com/choosing-a-tax-return-preparer/

    The ultimate responsibility for the accuracy of the return falls upon the taxpayer. If the return is inaccurate the taxpayer will be responsible for any taxes and penalties that may result from the inaccuracy. Choosing a knowledgeable and reputable tax preparer is important.

12. New Client Scams and Spearphishing: The IRS continues to see this scam which involves spear phishing attempts targeting tax professionals. Scammers will pretend to be potential new clients in an effort to trick the tax professional into responding to their email. When the tax professional responds, the scammer responds with an attachment that attacks the professional’s computer and allows the scammer to access client information.

As a taxpayer, if your tax professional is the target of spearphishing your personal and tax information could be used by the  scammer to file fraudulent returns. Protect yourself by making sure your tax professional has security measures to protect your data and to reduce the likelihood that spearphising attempts will be successful.