Latest IRS Scams and Schemes - Targeting Refunds and Coronavirus Economic Impact Payments

Tuesday, February 16, 2021

Dealing with IRS scams can be an obstacle for taxpayers, businesses, and tax professionals during the upcoming tax season. These IRS tax scams are often wide-ranging, as criminals are constantly looking at ways to trick you out of your money. 

Staying aware of these tax scams is especially important in keeping your money safe during this pandemic. Recently, the IRS released a "Dirty Dozen" list of tax scams that highlight aggressive schemes related to the coronavirus tax relief program, such as the Economic Impact Payments.


These IRS tax scams tend to increase during a time of crisis, as criminals attempt to take advantage of people during desperate times. However, understanding the common signs of these tax scams is essential in staying one step ahead of these criminals.


Here is a brief overview of the "Dirty Dozen" list of tax scams to watch.


1) Phishing Scams

Phishing scams are an all too common problem during tax season. These malicious schemes attempt to trick people into giving out personal information by using a fake email or website. However, it's important to remember that the IRS will never reach out to taxpayers via email to discuss payroll tax relief, Economic Impact Payments, or a refund.


You should always remain wary of these scams and never click on any links or download an attachment. These emails often contain malware, which can steal your data and cause damage to your computer. Many of these IRS scams contain keywords, such as "COVID-19", "Stimulus," and "coronavirus" to trick people into opening these messages.


Phishing scams often attempt to play on the fear of the unknown or create a sense of urgency. The safest option is to immediately delete or send these emails to your spam folder. Educating employees about phishing scams is also helpful in staying proactive against these threats.


2) Social Media Scams

Social media scams are also a growing concern, as scammers gain information from these sites to target individuals. These social media scams are often wide-ranging, as they can target someone's friends, family members, or co-workers.


These social media scams are similar to phishing schemes, as they often attempt to trick an individual that they are dealing with someone they can trust. One of the best ways to stay proactive against social media scams is to keep your profile private and only add people that you know in real life.


3) Fake Charities

Another common scam is dealing with fake charities. These scams are especially prevalent in times of crisis, such as the Covid-19 pandemic. Criminals often take advantage of well-intentioned people by setting up fake charities.


Many times these criminals will contact individuals through email, social media, or by telephone. These tactics can vary depending on the scam, such as giving you a link to a fake website, or they may even claim to offer tax relief programs for businesses.


A legitimate charity will give you their Employer Identification Number (EIN) upon request, which makes it easy to verify the legitimacy of an organization. Taxpayers can also search the IRS website to identify legitimate charity organizations to avoid becoming the next victim to these schemes.


4) Tax Refund Scams

The prevalence of tax refund scams remains an ongoing threat, despite significant efforts made by the IRS. These criminals often focus on stealing coronavirus economic impact relief that's available from the government.


Many of these tax refund scams are successful due to identity theft. Criminals will typically supply false information to the IRS to illegitimately gain access to funds meant for other individuals or businesses. This is especially problematic for vulnerable populations, such as in nursing homes or other medical care facilities.


Taxpayers need to visit this IRS webpage if they need assistance in receiving their EIPs. Visiting the Taxpayer Guide to Identity Theft is also important if you believe you are the victim of a tax refund scam.


5) Ransomware Schemes

Ransomware is another growing cybersecurity threat impacting a wide range of businesses. A ransomware attack often happens due to an employee accidentally downloading a malware attachment from an email. Ransomware locks an individual out of their computer and encrypts sensitive data unless the company pays a significant fee.


Ransomware can also impact an entire network and cause widespread problems. However, paying the fee isn't a guarantee that you will regain access to your information. 


One way to avoid this problem is to create regular data backups on the cloud. Educating employees on how to identify potential ransomware attacks is also important in staying at least one step ahead of these criminals.


6) Senior Fraud

Senior citizens and their caregivers need to stay on alert for IRS tax scams. These criminals often target senior citizens through IRS scam calls. Staying aware of these evolving scams is essential for seniors.


Many older Americans are using social media, which poses significant risks. Scammers often create elaborate phishing scams and social engineering attacks that attempt to take advantage of seniors new to social media. 


Every senior needs to stay aware of these threats while never giving out any personal information to these criminals.


7) Scams Focusing on Non-English Speakers

Many IRS tax scams often target groups of people with minimal English proficiency. These scams often focus on non-English speakers receiving Economic Impact Payments. Typically, these IRS scam calls use some personal information to appear legitimate, such as including an address or the last digits of their Social Security number.


These IRS scam calls often use threats of deportation or jail time if an individual doesn't give in to their demands. These threats are especially problematic for new immigrants. Staying aware of these tactics is critical in avoiding these tax scams.


8) HR and Payroll Scams

Taxpayers need to remain on guard against a variety of HR and payroll scams. These malicious schemes often use a compromised email account to trick individuals into giving out personal information. Sometimes these scams include gift cards, while others focus on direct deposit fraud.


These criminals may also gain access to a victim's email account and reach out to their organization to change their direct deposit details and reroute paychecks to a fraudster's bank account. Using strong passwords and staying aware of phishing schemes is critical in avoiding these scams.


9) Fraudulent Return Preparers

Choosing the right tax return preparer is also important to avoid potential problems. Tax professionals are entrusted with sensitive information, as a dishonest preparer can cause significant financial damages.


You should only use a credible tax preparer that will keep your information safe. Many offices are closed due to COVID-19, as it's now more important than ever to use a tax professional that offers high-quality services. Using a tax preparer that promises inflated refunds is always a major red flag, as they may use fake education credits or falsify other documents to gain extra money. 


Taxpayers should also never use a preparer that asks for them to sign a blank return. Only using a reputable tax preparer can save you a lot of stress and help you avoid future problems with the IRS.


10) Threatening Fake Phone Calls

IRS scam calls can happen in a variety of different ways. A common tactic is creating a sense of urgency by demanding immediate payment. These scammers often attempt to take advantage of a victim's fear to give them access to their personal information.


These phone scams are also known as "vishing" schemes, as they are similar to phishing, except they use a phone call instead of an email. Threats can also be wide-ranging such as threatening arrest, license revocation, or deportation. Many of these scammers use robocalls to target a wide range of individuals.


It's always important to remember that the IRS will never ask for financial information over the phone or demand immediate payment. Taxpayers need to contact the IRS if they have any questions or problems with their taxes.


11) Offers From Compromise Mills

Taxpayers also need to remain wary of misleading claims from tax debt resolution businesses, such as setting tax debts with "pennies on the dollar" by using an Offer in Compromise (OIC). While these offers are available for meeting specific requirements under the law, many unscrupulous businesses oversell the program to gain a significant fee from struggling taxpayers.


These scams are also known as OIC "mills", as they often cast a wide net to charge pricey fees and send out applications that taxpayers will not likely qualify due to the specific requirements. For example, more than 54,000 OICs were submitted to the IRS in 2019, but the agency only accepted 18,000 of these applicants.


The safest option is for taxpayers to use the Offer in Compromise Pre-Qualifier tool that's available for free to use online. This simple to use tool enables taxpayers to confirm their eligibility while also providing an estimated offer. Taxpayers can also apply for an OIC without a third-party.


12) False Payments and Repayment Demands

Criminals are always finding new ways to trick taxpayers into falling for their scam, such as providing a false refund to their bank account.


These scams are often made possible by a criminal stealing a taxpayer's social security number or bank account information. A scammer will file a fake tax return into their checking or savings account and contact the taxpayer to explain their there's been a mistake. These criminals will demand that you return the money immediately, or it will result in significant penalties.


The taxpayer is often told to purchase gift cards in the amount of a refund. However, the IRS will never demand anyone to make a payment by using a specific method. A taxpayer should always reach out to the IRS if they receive an unexpected refund and a demand for a refund payment.


Coronavirus Tax Relief and the Payroll Protection Program

Always staying aware of these IRS tax scams is essential in keeping your money safe from these criminals. Tax scams are especially prevalent due to the impact of COVID-19. The Coronavirus Tax Relief and Payroll Protection Program play a key role in giving businesses the necessary funds to survive the economic impact of the coronavirus. Unfortunately, many criminals are finding ways to take advantage of these programs by using a wide variety of scams. These IRS tax scams will continue to evolve but staying aware of these threats is a great way to stay proactive and prevent yourself from becoming the next victim.


Curious about navigating tax compliance for your business?

To add clarity to the complicated subject of Sales and Use Tax Laws, Dynamic Communities is convening with Avalara tax experts for a free virtual Tax Law Binge Day event.

Join us for Tax Law Binge Day on February 24, 2021, from 11:00 am-1:00 pm EST!


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