Now that the new year is well underway business owners are focusing on tax season. Unfortunately, in addition to tax season being a money maker for the government, it’s also a money maker for scammers.

Scammers are relentless and they ramp up their efforts during tax season. Falling for one of their scams could result in identity theft, hacked bank accounts, or getting you in serious trouble with the IRS.

The Dirty Dozen

The IRS put together this “dirty dozen” list of the most common scams they see during tax season. Make sure you don’t fall victim to one of them.

Email phishing scams:
Be on the lookout for fake communications from entities posing as legitimate organizations in the tax and financial community,
including the IRS, state tax agencies, and tax software companies. These messages arrive as texts or emails to lure unsuspecting victims into providing valuable personal and financial information that can lead to identity theft. The
two main types are:

• Phishing: An email sent by fraudsters claiming to come from the IRS. The email lures the victims into the scam with a variety of ruses such as enticing victims with a phony tax refund or threatening them with false legal or criminal charges for tax fraud.
• Smishing: A text message where scammers use language such as, “Your account has now been put on hold,” or “Unusual Activity Report,” with a bogus “Solutions” link to restore the recipient’s account. The promise of unexpected tax refunds is another potential tactic used by scam artists.

Never click on any unsolicited communication claiming to be from the IRS as it may load malware or ransomware on your device.

Bad social media advice: Another thing to watch out for is incorrect tax information on social media that can mislead honest taxpayers with bad advice. Social media platforms routinely circulate inaccurate or misleading tax information, including on social media where people share wildly inaccurate tax advice. Some involve urging people to misuse common tax documents like Form W-2. Knowingly filing fraudulent tax returns could open you up to significant civil and criminal penalties.

IRS Individual Online Account help from scammers: A swindler can pose as a “helpful” third party and offer to help create a taxpayer’s IRS Individual Online Account at IRS.gov. The IRS Individual Online Account provides taxpayers with valuable personal tax information. But watch out: Third parties making these offers will try to steal your personal information and try to submit fraudulent tax returns in the your name to get a big refund.

Fake charities: Bogus charities are a perennial problem whenever disaster strikes. Scammers set up these fake organizations to take advantage of the public’s generosity. They seek money and personal information, which can be used to further exploit victims through identity theft. If you are in doubt, you can check to see if the charity is fake by searching for the charity at the IRS website. You can check to see if the charity is legit with the IRS: https://apps.irs.gov/app/eos/

False Fuel Tax Credit claims: Taxpayers have been misled into believing they were eligible for the Fuel Tax Credit. The credit is meant for off-highway business and farming use and is not available to most taxpayers. The IRS has seen an increase in the promotion of filing certain refundable credits using Form 4136, Credit for Federal Tax Paid on Fuels. The IRS urges people to ensure they are properly claiming this credit.

Credits for Sick Leave and Family Leave: This specialized credit is available for self-employed individuals for 2020 and 2021 during the pandemic; the credit is not available for later tax years. The IRS is seeing repeated instances where taxpayers are incorrectly being told they can still claim this credit based on advice from scammers who call or email you.

Bogus self-employment tax credit: Social media advice continues to circulate about a non-existent “Self-Employment Tax Credit” that’s misleading taxpayers into filing false claims. Promoters market it as a way for self-employed people and gig workers to get big payments for the COVID-19 pandemic period. Similar to misleading marketing around the Employee Retention Credit, there is inaccurate information being circulated about these false tax credits.

Improper household employment taxes: Taxpayers are convinced to “invent” fictional household employees and then file Schedule H (Form 1040), Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid.

The overstated withholding scam: This is a recent scheme circulating on social media encouraging people to fill out Form W-2, Wage and Tax Statement, or 1099s with false income and withholding information. Scam artists suggest people make up large income and withholding amounts as well as the fictional employer supplying those amounts. Scam artists then instruct people to file the bogus tax return electronically in hopes of getting a substantial refund due to the large amount of fraudulent withholding.

Misleading Offers in Compromise: The Offers in Compromise (OIC) program is an important program to help people settle their federal tax debts when they are unable to pay in full. But “mills” can aggressively promote Offers in Compromise in misleading ways to people who clearly don’t meet the qualifications, frequently costing taxpayers thousands of dollars. A taxpayer can check their eligibility for free using the IRS Offer in Compromise Pre-Qualifier tool. Click here to check it out: https://irs.treasury.gov/oic_pre_qualifier/

Ghost tax return preparers: Most tax preparers provide outstanding and professional service. However, people should be careful of shady tax professionals and watch for common warning signs, including charging a fee based on the size of the refund. A major red flag or bad sign is when the tax preparer is unwilling to sign the return. Avoid these “ghost” preparers, who will prepare a tax return but refuse to sign or include their IRS Preparer Tax Identification Number (PTIN) as required by law. Taxpayers should never sign a blank or incomplete return.

New client scams and spear phishing: The “new client” scam involves spear phishing attempts that target tax pros. Cybercriminals impersonate new, potential clients to trick tax professionals and other businesses into responding to their emails. Once the tax pro responds, the scammer sends a malicious attachment or URL that can compromise the preparer’s computer systems and allow the attacker to access sensitive client information.

Spear phishing holds greater potential for harm because a successful spear phishing attack can ultimately steal client data and the tax pro’s identity, allowing the thief to file fraudulent returns using the stolen information. Warning signs include poorly constructed sentences and unusual word choices. Be aware that by gaining access to a hacked email account, scammers can locate a genuine email from a previous victim’s email account sent to their tax professional.

When in Doubt, Check It Out

Tax season is stressful enough without getting caught up in one of these scams. So, if it seems too good to be true or feels a little fishy – check it out with the IRS or your own trusted tax professional. Taking a few minutes to do so could potentially save you a lot of money and stress.