5 Common Tax Scams You Should Know About

What could be worse than paying taxes? Turns out, it is falling for tax scams.

Each year, countless Americans fall victim to tax fraud. There are ever-changing clever schemes used to extort funds or information from taxpayers. The best way to protect yourself from fraud is to stay informed on the tactics used by scammers. Thankfully, the IRS publishes common practices taxpayers should familiarize themselves with in order to safeguard their personal information and assets. Here are a few examples.

Unclaimed Refunds

This mail scam tries to trick taxpayers into believing the Internal Revenue Service (IRS) is contacting them about claiming a refund. A delivery service will drop off an IRS branded letter and envelope that will read “in relation to your unclaimed refund.” At face value, the letter may look legitimate, but the IRS contact information is incorrect. The letter will try luring the taxpayer into sharing personal contact information, driver’s license information, and bank account profiles to claim the refund.

Employee Retention Credits

Be aware of aggressive pitches from scammers who promote large refunds related to the Employee Retention Credit (ERC). The IRS has seen blatant attempts by promoters to con ineligible business owners into claiming the credit by blasting ads on radio and the internet touting refunds involving ERCs. These promoters often offer to prepare the claims on behalf of the business owner, inaccurately claiming who is eligible for the credit and how it is calculated. Some of these ads exist solely to collect the taxpayer’s personally identifiable information in exchange for false promises. The scammers then use the information to steal the taxpayer’s identity.

Charity/Donation Fraud

Bogus charities are a perennial problem, especially worse whenever a crisis or natural disaster strikes. Scammers set up fake organizations to take advantage of the public’s generosity. They seek money and personal information, which can be used to further exploit victims through identity theft. Also, while you can claim a deduction for charitable contributions if you itemize deductions, charitable donations are deductible only if they go to a qualified charity recognized by the IRS. You can check an organization's eligibility to receive tax-deductible charitable contributions and review information about the organization's tax-exempt status and filings on the IRS’s website. https://apps.irs.gov/app/eos/

IRS Impersonation Telephone Scams

While you may think IRS telephone impersonation scams are a thing of the past, it continues to persist. Callers make aggressive calls posing as IRS agents, using fake names and bogus IRS identification badge numbers in hopes of stealing taxpayer money or personal information. The caller ID may even be altered to reflect the Internal Revenue Service.

Victims are told they are either owed a refund or owe additional funds to the IRS. The goal is to either persuade the victim to share bank information or to make a payment. In the case of making a payment, callers will often demand payment by gift card or wire transfer. These calls can be hostile and frightening for the victims. It’s important to note that generally the IRS will not call you, but rather contact you by mail.

Scams Targeting Educational Institutions, Students, and Staff

If you have an “.edu” email address, be aware of a recent IRS impersonation scam targeting members of educational institutions. Staff and students of both public and private universities were receiving higher volumes of phishing emails. The suspect emails display the IRS logo and use various subject lines, such as "Tax Refund Payment" or "Recalculation of your tax refund payment" luring people to click a link and submit a form to claim their refund. As opposed to usual ways to claim an IRS refund, this is just an attempt to steal personal information.

Conclusion

Knowledge, paired with healthy skepticism, is the best defense in the dynamic space of tax related fraud. The IRS’s website detailing dos and don’ts related to tax scams and fraud (see below) is a good general resource. Consider reviewing the Federal Trade Commission’s website on what to do in specific situations of identity theft. https://www.identitytheft.gov/Steps But should you ever be the victim of fraud, in addition to seeking help from local authorities, please feel free to reach out to us for advice.

Source:

Tax scams/Consumer alerts | Internal Revenue Service (irs.gov)

Disclosures: 

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