Tax day is right around the corner. You have until Tuesday, April 18, 2023, to file. With the clock ticking, scammers hope to quickly find as many victims as possible. That’s why the Internal Revenue Service (IRS) urges you to remain vigilant against email and text scams to trick taxpayers about refunds or tax issues.
Read on for this year’s “Dirty Dozen” tax tricks to watch for.
Watch for fake tax preparers and other schemes
“Email and text scams are relentless, and scammers frequently use tax season as a way of tricking people,” said IRS Commissioner Danny Werfel.
“With people anxious to receive the latest information about a refund or other tax issue, scammers will regularly pose as the IRS, a state tax agency or others in the tax industry in emails and texts. People should be incredibly wary about unexpected messages like this that can be a trap, especially during filing season.”
The Dirty Dozen is an annual IRS list of 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal data and more. Without further ado, here is the Dirty Dozen list for 2023.
1. Charitable Remainder Annuity Trust (CRAT)
This scam allows a person to falsely claim appreciated value on assets under a CRAT. They make out like a bandit as the added value remains tax-exempt.
2. Investing abroad to avoid taxes
U.S. residents may contribute to a fraudulent pension fund in Malta or another foreign country. They can then circumvent contribution limits using cash alternatives, resulting in tax-exempt gains.
3. Foreign captive investments
This one is complicated. Essentially, it is insurance fraud that utilizes cell arrangements and segregated asset plans that allow you to claim deductions on coverage in places like Puerto Rico.
4. Monetized installment sales
When IRS section 453 is abused, a property seller can collect the money received through purported loans. This leaves the sum of money nonrecourse and unsecured. Result? Profit for thieves.
5. Economic Impact Payment (EIP) fraud
Much like tax refund scams, an identity thief may be able to capitalize on your stimulus payment. They can do so by phishing you out of identifying information — always be wary of unofficial communication or messages purporting to be from the IRS, who will never contact you through phone, email, text or social media.
6. Unemployment fraud
This one is similar to the scam described above. Inaccurate taxpayer 1099-Gs allow people to collect on unemployment they didn’t receive during the pandemic. The same can be said for identity thieves that do the same on innocent peoples’ behalf.
7. Fraudulent employment offers
Post-pandemic, fake job listings have swarmed professional platforms like LinkedIn. Using the information candidates provide, these criminals may then file false returns, stealing the cash that results. Tap or click here for details on fake job board requests.
8. Fake charities and donations
Sometimes, it’s the charity putting up a false front. Other times, taxpayers may sneak past the rules to boost their potential deductions or return.
9. Ghost tax preparers
A preparer who refuses to sign off on your tax documents is a major red flag to avoid. These ghost preparers should be avoided at all costs.
10. Unusually high refunds
There are many ways an untrustworthy preparer may try to dupe you. Don’t get hooked by scam artists who promise you an outlandishly large refund.
11. Text and email scams
These phishing ploys resemble any other. Many pretend to bear information on stimulus payments and links to false IRS website portals designed to rob you of your Social Security number and additional identifying information.
12. Phone scams
As mentioned, the IRS does not correspond to constituents through phone calls. If you receive a prerecorded message that feels like it’s pressuring you for information, just ignore it.
How to report tax scams
If you run across any tax scam, you should report it ASAP. Here’s how:
- Report unsolicited emails claiming to be from the IRS by sending them as attachments to email@example.com.
- If you receive a phone call from the IRS and the caller demands payment or threatens to bring in the police, hang up and report it to the Treasury Inspector General Administration (TIGTA).
- Report the call via email to firstname.lastname@example.org. Write “IRS Phone Scam” in the subject line.
- Report scam calls to the Federal Trade Commission at FTC.gov. Add “IRS Telephone Scam” in the notes.
- Report unsolicited text messages from the IRS to email@example.com. Include a screenshot of the message, the date and time you received it, and the sender’s phone number.
- Go to the Report Phishing and Online Scams page at IRS.gov for more information.
Good luck this tax season. May your exceptions be immense and your refund plentiful.
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