Analyzing the IRS 2023 “Dirty Half-Dozen”
How to Avoid Getting Scammed as a Taxpayer
What is the Dirty Dozen?
The IRS collects information annually about active and updated risks and posts to this Dirty-Dozen Page. It’s a “one stop shop” for current and past information on scams affecting taxpayers. This list is designed to educate and help you avoid falling prey to these deceptive schemes. Although these schemes often ramp up during tax season, taxpayers should be wary and on guard all year long.
Here – for the sake of ‘digestibility’ – we provide a summary of the first six items in reverse chronological order. Read until the end for best practices you can adopt to keep your financial and tax records safe and secure. We will follow this up with the second half-dozen shortly, so stay tuned.
Dirty Dozen #6: Unscrupulous Tax Return Preparers
The IRS cautions taxpayers to avoid engaging tax professionals who exhibit specific concerning features and to watch for warning signs, such as charging fees based on the size of the tax refund or refusing to sign the tax return. Here are the tips summarized in the article:
- Choose carefully: a taxpayer should choose a professional relationship with a tax preparer similarly to selecting a doctor or lawyer. Check credentials (CPA preferred) and validate that they have a PTIN (IRS “Preparer Tax Identification Number”).
- Don’t get “ghosted.” Avoid tax preparers who refuse to sign tax returns or to include their PTIN (which is required by law).
- Red flag alerts: watch out for “cash only” billing, preparers who advise that refunds should be deposited into their own account rather than that of the taxpayer, and preparers who use false data as a method to gain bigger refunds.
Dirty Dozen #5: Fake Charities and Disaster Relief Claims
Scammers often pose as donors or fake charities, especially after a major or local disaster. With this type of scam, not only is your bank account information at risk, but you also run the risk of personal and tax-related identity theft. To protect against fake charity scams:
- Don’t feel rushed: legit organizations will be patient to receive your donation. If they pressure you, that could be a key indicator of a fake charity/organization.
- Verify first: scammers often use fake names or web domains that are extremely close to legitimate organizations. Ask for the exact website, mailing address, etc., and compare via internet search to validate.
- Analyze the money transfer method: legit charities won’t ask for gift cards or wire transfers as primary methods. Pay by credit card or check after validation.
Dirty Dozen #4: Improper Fuel Tax Credit Claims
The IRS warns taxpayers to be wary of promoters pushing false fuel tax credits. These scammers may charge large fees for unqualified claims and angle to process identity theft. To avoid this:
- Be cautious of tax saving promotions that sound too good to be true.
- Validate any third party who approaches you with eligibility that may be suspect.
- Seek advice from a tax adviser or credit specialist before accepting any offer.
Dirty Dozen #3: IRS.gov Online Account Scams
Taxpayers should be cautious of any communication related to assisting with setting up online accounts on government websites. The scammers pretend to be helpful but are actually looking to commit identity theft, steal financial information, or other methods of money transfer. To avoid this scam:
- Do not trust any 3rd party offers to set up web accounts for the IRS. A validated IRS agent will not contact you in this manner.
- Do not share personal and confidential information over email, phone, or social media.
- Create your own account directly on IRS.gov and make sure it’s linked to an email account that has multi-factor authentication setup.
Dirty Dozen #2: “Phishing” and “Smishing” Scams
This scam is the most traditional; however, the scammers here are getting smarter and the scams are tougher to diagnose with the infusion of AI (Artificial Intelligence) powered chatbots. Criminals will use emails and text messages, posing as IRS, state tax, or other seemingly valid organizations to steal taxpayer information. Most of the messages will use scare tactics to try and force quick action or promise fake refund benefits. Here are a few best practices:
- Be extremely cautious of unsolicited emails or texts, especially during tax season and beginning of the year. In fact, employing a “zero trust” mentality on unexpected messages can work with validation in mind.
- Remember that the IRS will not contact taxpayers via email, text, or social media about bills or refunds.
- Do not click on links or attachments from unknown senders.
- Report phishing emails to email@example.com or smishing to the Treasury Inspector General for Tax Administration or the Internet Crime Complaint Center.
Dirty Dozen #1: Employee Retention Credits (ERC) Schemes
Likely you have heard advertisements on radio, TV, or various websites regarding this scam. False promoters will promise large tax benefits with inaccurate information and improper methods of checking eligibility. If it sounds too good to be true, it most likely is.
What Does it All Mean…
Criminals are actively working all of these angles because they’ve been so effective. They are stealing identities, financial information, and cash. As the Dirty Dozen list continues to evolve, it is essential to remain vigilant and informed about potential scams and schemes that put your finances and personal information at risk. Always consult a trusted tax professional and report any suspicious activities to the appropriate authorities.
Have questions or need assistance? Contact Sean McLean, PMP, PP&Co Director of Technology at (408) 287-7911 or firstname.lastname@example.org for help or guidance with your specific situation.