Each year the IRS issues a list of scams it refers to as the Dirty Dozen. The purpose of publishing the list is to warn taxpayers about 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 these scams. The schemes which made this year’s list are:

1. Phishing and Smishing: The IRS continues to see texts, direct messages and emails directed at taxpayers which appear to be coming from the IRS. These messages will express urgency or use alarming language. The messages may display QR codes directing the taxpayer to a fake IRS website. The taxpayer will be asked to “verify” accounts, or claim refunds. The purpose of the communication is to lure taxpayers into providing their personal and financial information.

Remember the IRS will never initiate contact through phone calls, direct messages, texts or e-mails. 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. Clicking on links or downloading attachments may result in malicious software or ransomware being installed on your device.

2. AI-enabled IRS Impersonation by Phone: The IRS is seeing phone calls using computer generated schemes such as robocalls, spoofed caller ID and voice mimicry to appear as if the call is coming from the IRS. Be aware that the IRS does not leave pre-recorded messages urging action, demanding payment, or threatening arrest. Generally, you will not receive a phone call from the IRS unless you are already working with an individual at the IRS.

The IRS also warns taxpayers not to rely on AI generated responses to complex tax questions and to verify any calculations and information provided by AI. Tax law is complicated, consult with a knowledgeable tax professional for your tax issues. Furthermore, consider that inputting personal, confidential information into an AI platform may not be kept confidential if the information will be used to “train” the AI model and might thus become accessible to third parties.

3. 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 and to determine whether the charity is legitimate refer to: https://magdaabdogomezlaw.com/tips-protecting-making-charitable-contributions/

4. Misleading Tax Advice on Social Media: 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 file returns with false information or to claim credits for which they do not qualify. Following the erroneous advice can lead to the audit of the return, delays in refunds, identity theft and the imposition of tax penalties. Knowingly filing false tax returns can also result in criminal prosecution. Obtain tax advice from trusted, reputable and knowledgeable sources instead of social media.

5. Identity Theft: There are scammers who pose as “helpers” and offer a taxpayer help in creating an online account with the IRS. In the process of setting up the account these scammers obtain the taxpayer’s personal information which can lead to identity theft and the ability to access the taxpayer’s online account they helped create. Be aware that taxpayers can easily set up an online account with the IRS themselves. It is very simple to do and costs nothing to set up.

6. Abusive Undistributed Long-Term Capital Gains Claims: IRS Form 2439 allows shareholders of certain investment funds or real estate trusts to claim a refundable credit for taxes paid on undistributed capital gains. The IRS has noticed an increase in the number of abusive Form 2439 claims. The IRS has identified three schemes in particular: (a) overstating the amount of the claim or making false claims to the credit, (b) filing claims involving entities that are not legitimate investment funds or real estate trusts and (c) false claims involving legitimate investment funds or real estate trusts. Beware of anyone advising you that you are entitled to this credit and verify that claiming the credit is proper. Making false claims can result in the auditing of your return, a delay in a refund to which you may be entitled, penalties and possible criminal prosecution if the false claim was intentional.

7. Self-Employment Tax Credit Scam: Taxpayers continue to be misled by scammers and through social media posts that the self-employed are entitled to a “self-employment credit”. Claiming the credit generates a refund for the taxpayer. The IRS has announced that most taxpayers do not qualify for the credit. The IRS has warned that it is closely reviewing returns claiming this credit and that falsely claiming the credit will lead to the imposition of penalties and a delay in the processing of the return.

8. Ghost Preparers: The IRS continues to warn taxpayers to be careful when hiring a tax return preparer. Stay away from a preparer who refuses to sign the return, fails to include his/her IRS Preparer Tax Identification Number or asks you to sign an incomplete or blank return. There are warning signs of which taxpayers should be aware. 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 even if the tax return preparer was dishonest. Choosing a knowledgeable and reputable tax preparer is important.

9. Non-Cash Charitable Contribution Schemes: These schemes involve inflating the value of property donated using syndicated conservation easements or artwork. As with all schemes, the goal is to reduce the taxpayer’s tax liability. The IRS warns taxpayers that all information on a return must be factual and verifiable. The IRS can hold up any refund until the claim made on the return can be verified.

10. Overstated Withholding Scheme: This scheme, which was first noticed last year, continues to mislead taxpayers into inflating the withholding taxes reported on their return so as to generate a larger refund. The scheme generally involves reporting withholding on Forms W-2 and W-2G; Forms 1099-R, 1099-NEC, 1099-DIV, 1099-OID, 1099-B, the Alaska Permanent Fund Dividend, and Schedule K-1 and claiming an unspecified source of withholding credit on the return. The truth is that the IRS receives income and withholding information from third party payors. If the figures do not match or the IRS cannot verify the income and withholding reported on the return, it will generally hold back the refund pending further review of the return.

11. Spearfishing and Malware Campaigns Targeting Tax Professionals: 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.

Protect yourself by asking your tax professional what security measures he/she takes to protect your data. You can also take steps to protect yourself by: (a) looking out for any suspicious requests or unusual behavior before sharing any sensitive information or responding to an email, (b) not opening documents or attachments to an e-mail without first verifying the source of the e-mail, (b) being wary of unexpected requests for sensitive information, and (c) looking out for mismatched or unfamiliar sender addresses, urgent payment demands, or links directing you to websites.

12. Offer in Compromise Mills: 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 law does exist allowing the IRS to lower a taxpayer’s debt, there are strict requirements for qualification. These companies charge excessive fees to represent taxpayers who many times do not qualify for the relief under the law.