Scammers never let an opportunity go to waste, and the COVID-19 pandemic has introduced new ways for bad actors to prey on the vulnerable and scared in the form of IRS scams. Criminals are already attempting to steal money and personal information under the guise of coronavirus tax relief. The IRS recently released their “Dirty Dozen” list of tax scams in order to help taxpayers protect themselves and their families.
Remember, the IRS will always initiate contact about a tax matter via U.S. mail. A phone call demanding immediate payment, asking you to verify information, or promising an unexpected refund should always raise red flags. If you receive a call from someone claiming to be initiating contact from the IRS, never discuss or disclose personal information. Hang up immediately and contact the IRS or your tax preparer. Individual taxpayers should call 1-800-829-1040 and business taxpayers should call 1-800-829-4933.
Following is a list of 12 common IRS scams. By familiarizing yourself with these tactics, you’ll be equipped to identify illegitimate forms of IRS contact and stop scammers in their tracks.
1. Phishing for information
Use caution with emails and websites claiming to be associated with the IRS. There has been a major increase in phishing schemes using emails, letters, text messages, and links with the keywords coronavirus, COVID-19, and stimulus. These schemes will ask you to enter personal identifying information or financial account information.
The IRS will never 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.
2. When giving hurts
It’s very common for scammers to set up fake charities during times of crisis and steal from good-hearted people who are trying to help during difficult times. With 2020’s $300 tax deduction for charitable donations, scammers have all the more incentive to use this tactic. The most common way fake charities solicit donations is by contacting you via phone, text message, social media, or email and claiming to be a representative of a charity. They often use a name that’s similar to a well-known organization.
You can verify a charity’s legitimacy by asking for its Employer Identification Number (EIN). You can also use this IRS search tool to find charities that are registered with the IRS, which is a quick and easy way to ensure the charity is on the up and up.
3. Using fear as a tool
If someone claiming to be from the IRS is threatening to send you to jail, deport you, or revoke your license because you have an unpaid bill, it’s very likely to be a scam. These types of phone calls aren’t new and happen year-round.
The IRS will never call you to demand immediate payment, threaten punishments, or ask for financial information. You also won’t receive surprise calls about an unexpected refund or Economic Impact Payment. These are always red flags and should be reported.
4. Impersonating those closest to you
Using social media, scammers collect personal information about you and may impersonate people in your life to elicit money or information from you.
A scammer may send an email to a potential victim and include a link that contains malware. They could also send emails and texts to your contacts, encouraging them to make a small donation to a fake charity that would be appealing to them.
5. Where’s my refund?
Refund theft is an issue the IRS fights against every tax season. This year, criminals turned their attention to the stimulus money provided through the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The most common way criminals steal tax refunds is via identity theft. They use your information to file a false tax return and have the IRS send the money to the wrong address or bank account. There have also been reports of some nursing home employees stealing checks from the seniors living within the residential facilities.
Anyone who believes they may be a victim of identity theft should check out the IRS’ Taxpayer Guide to Identity Theft. By filing your tax return or extension early, you can lock your tax record and stop anyone from filing a fraudulent return in your name.
6. Seniors must be on high alert
Senior citizens have always been the primary target of scammers. Now that older Americans are becoming more tech-savvy and using social media, criminals are using these platforms as another way to launch their IRS scams. COVID-19 phishing scams have been a major threat this year. Seniors should always be skeptical of emails, text messages, websites, and social media attempts to collect personal information.
If you have friends or family members who live in a nursing home, you can help them out in this area. Research has shown that the more involved you are in their lives, the less likely they will be taken advantage of by scammers and criminals.
7. Targeting non-English speakers
Threats of deportation or jail time are often used to scare recent immigrants into falling prey to a scam. IRS impersonators target groups with limited knowledge of the English language and may even have some of the taxpayer’s information to make the call sound more legitimate. Once again, if you receive a call of this nature, hang up and report it to the real IRS.
8. Deceitful tax preparers
Not all tax preparers have your best interests in mind. Every tax season, the IRS becomes aware of more preparers who commit fraud, harm innocent taxpayers, or trick taxpayers into doing illegal things.
Beware of ghost preparers. These individuals will not sign the tax returns they prepare—they’ll prepare the return and instruct you to sign and file. All tax preparers are required to have a Preparer Tax ID Number and must sign all returns using their PTIN. Ghost preparers will often promise inflated returns by claiming fake tax credits, including education credits, the Earned Income Tax Credit, etc.
You provide tax preparers access to some of your most sensitive personal information, which is why it’s incredibly important to select someone who’s credible and trustworthy. Taxpayers are ultimately responsible for the accuracy of their tax returns, no matter who prepares it. Before engaging a new tax preparer, ask for his or her PTIN. You can search the IRS database to ensure the preparer is legitimate.
9. Exaggerated tax debt resolutions
Hoping to reduce your tax bill? If you’ve been offered an opportunity to settle your tax debts for “pennies on the dollar” through an Offer in Compromise (OIC), you may have been the victim of a scam that’s commonly called an OIC mill. While the legitimate OIC program helps thousands of taxpayers a year reduce their tax debt, it’s only available to taxpayers who meet very specific criteria.
OIC mills are considered IRS scams because they grossly exaggerate your chances of settling tax debts. They charge hefty fees and encourage people to apply for a program they’re unlikely to qualify for. In Fiscal Year 2019, there were 54,000 OICs submitted to the IRS, but only 18,000 were accepted.
Use the IRS’ free online tool to see if you could qualify for an OIC.
10. Bogus money in the bank
If a scammer can obtain a taxpayer’s personal data, including your social security number, individual tax ID number, and/or bank account information, they might trick you by depositing a bogus refund into your actual bank account.
Here’s what will happen. A bogus tax return will be deposited into your bank account. Once the direct deposit hits the account, you’ll receive a call from a con artist posing as an IRS employee. He or she will inform you that there’s been an error, and the money must be returned immediately, or you’ll receive penalties and interest. You’ll be instructed to purchase specific gift cards for the amount of the refund. By the time the deposit bounces in your account, the scammer will be long gone with your money.
The IRS will never demand payment through a specific method—gift cards are a particularly egregious sign of an IRS scam. If you ever receive an unexpected refund or a call from someone demanding a refund, contact your bank and inform the IRS immediately.
11. Business email scams
Scams aren’t limited to your personal accounts. Tax professionals, employers, and taxpayers alike must be on guard against phishing emails designed to steal W-2 information. These types of scams are becoming more prevalent since employees have been working from home due to COVID-19.
Two of the most common are the gift card scam, where a compromised email account is used to send a request to purchase gift cards in various denominations, and direct deposit schemes that use the victim’s email account (or a spoofed email address) to request a change to his or her direct deposit information. Sometimes, fake IRS documents are used to add a varnish of legitimacy to the fake request.
Always verify email-based requests with the individual. It can be as simple as a phone call.
12. Ransomware
Malware is an invasive software that may be accidentally downloaded to a computer by the user after clicking a link or opening an attachment in an email that contains ransomware. That link could appear to be something as innocent as supporting a COVID-19 charity.
Once the malware is downloaded, it tracks computer activity and collects sensitive data. In some cases, an entire computer network could be impacted. Victims typically won’t know their computer has been infected until they try to access their data or receive a ransom request in the form of a pop-up window, where criminals anonymously demand payment in virtual currency, such as Bitcoin.
Con artists and scammers are constantly adapting and changing their tactics. When it comes to identifiying IRS scams, trust your gut. If a phone call or email seems fishy, don’t engage and report it immediately. If you’re not comfortable contacting the IRS yourself, ask your tax preparer for assistance. Scammers prey on your panic. They’ll attempt to keep you from researching their requests or sharing the contact with anyone else in your life.
You can always hang up and contact your tax preparer for help. The real IRS pours countless resources into stopping scams and has programs to assist you should your information be compromised.