By Jennifer F. Flinchum, CPA, CFP®, Tax Partner | Family, Executive & Entrepreneurs Advisory Services Team
Taxpayers Should Consider These 2020 Tax Scams in Light of COVID-19
Each year the IRS announces its “Dirty Dozen” list of tax scams to help raise awareness about common scams that criminals use to target taxpayers. According to IRS Commissioner Chuck Rettig, “Tax scams tend to rise during tax season or during times of crisis, and scam artists are using the pandemic to try and steal money and information from honest taxpayers.” The IRS urges taxpayers to refrain from engaging potential scammers online or on the phone.
Individuals and businesses should be mindful of these scams not only during tax season but throughout the year. Unfortunately, many of the scams carryover from year to year with slight modification.
12 Tax Scams to be Aware of in 2020:
IRS Criminal Investigation has seen a tremendous increase in phishing schemes utilizing emails, letters, texts and links. These phishing schemes are using keywords such as “coronavirus,” “COVID-19” and “Stimulus” in various ways.
- Fake Charities
‘Fake’ charities attempt to attract donations from unsuspecting contributors, using a charitable reason and a tax deduction as bait for taxpayers.
- Threatening Impersonator Phone Calls
Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers. Taxpayers need to be aware that the IRS will never demand immediate payment, threaten, ask for financial information over the phone, or call about an unexpected refund or Economic Impact Payment (EIP).
- Social Media Scams
Social media scams aim to convince a potential victim that they are dealing with someone close to them that they trust via email, text or social media messaging. Using personal information, a scammer may email a potential victim and include a link to something of interest to the recipient which contains malware intended to commit more crimes.
- EIP or Refund Theft
Criminals this year also turned their attention to stealing Economic Impact Payments as provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Much of this stems from identity theft whereby criminals file false tax returns or supply other bogus information to the IRS to divert refunds to wrong addresses or bank accounts.
- Senior Fraud
Senior citizens continue to be highly targeted by scammers. As Seniors become increasingly comfortable with social media and technology, they need to be alert for fake emails, text messages, websites and social media attempts to steal personal information.
- Scams Targeting Non-English Speakers
IRS impersonators and other scammers also target groups with limited English proficiency. These scams are often threatening in nature. Some scams also target those potentially receiving an Economic Impact Payment and request personal or financial information from the taxpayer.
- Unscrupulous Return Preparers
Taxpayers should avoid so-called “ghost” preparers who expose their clients to potentially serious filing mistakes as well as possible tax fraud and risk of losing their refunds. With many tax professionals impacted by COVID-19 and their offices potentially closed, taxpayers should take particular care in selecting a credible tax preparer.
- Offer in Compromise Mills
Taxpayers need to be wary of misleading tax debt resolution companies that can exaggerate chances to settle tax debts through an Offer in Compromise (OIC). These offers are available for taxpayers who meet very specific criteria under law to qualify for reducing their tax bill. But unscrupulous companies oversell the program to unqualified candidates so they can collect a hefty fee from taxpayers already struggling with debt.
- Fake Payments with Repayment Demands
A scammer steals or obtains a taxpayer’s personal data including Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN) and bank account information then files a fake tax return and has the refund deposited into the taxpayer’s checking or savings account. Once deposited, the scammer calls them, posing as an IRS employee. The taxpayer is told that there’s been an error and that the IRS needs the money returned immediately or penalties and interest will result. The taxpayer is told to buy specific gift cards for the amount of the refund.
- Payroll and HR Scams
Tax professionals, employers and taxpayers need to be on guard against phishing designed to steal Form W-2s and other tax information. This is particularly true with many businesses closed and their employees working from home due to COVID-19. Currently, two of the most common types of these scams are the gift card scam and the direct deposit scam.
This is a growing cybercrime. Ransomware is malware targeting human and technical weaknesses to infect a potential victim’s computer, network or server. Malware is a form of invasive software that is often frequently inadvertently downloaded by the user. Once downloaded, it tracks keystrokes and other computer activity. Once infected, ransomware looks for and locks critical or sensitive data with its own encryption. In some cases, entire computer networks can be adversely impacted.
How does the IRS contact taxpayers?
Knowledge is the best way to protect yourself and your data – you should know how the IRS will contact you so that you are able to best distinguish between legitimate contact and fraudulent scams.
The IRS does not initiate contact with taxpayers via email about a tax bill, refund or Economic Impact Payments. Don’t click on links claiming to be from the IRS. Learn how the IRS contacts taxpayers.
Those who receive unsolicited emails, text messages or social media attempts to gather information that appear to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), should forward it to email@example.com.
Taxpayers are encouraged not to engage potential scammers online or on the phone. Learn more about reporting suspected scams by going to the Report Phishing and Online Scams page on IRS.gov.
If ever concerned about a call or other contact from the IRS (or other taxing authority), please your Keiter representative or refer to the official web presence. Example: Official IRS information about the COVID-19 pandemic and economic impact payments can be found on the Coronavirus Tax Relief page on IRS.gov. The page is updated routinely when new information is available.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.