How to Protect Yourself from These IRS Tax Scams

During the past few years, we have seen an influx in tax related scams affecting consumers. Here's how to protect yourself from the most common IRS tax scams.

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The IRS is renewing its information on frequent and common tax scams, providing multiple newsletters to taxpayers urging them to beware the signs of a tax-related con, especially during the pandemic.

The IRS is part of a coalition of state and national tax community members called the Security Summit, focusing on disseminating helpful security tips to taxpayers and businesses looking to protect their personal information, and prevent IRS tax scams and identity theft.

IRS Tax Scams to Avoid

In addition to the latest Dirty Dozen scams, below are a few common tax-related scams, as well as important tips for self-defense both online and via the phone.

1. Tax-Related Identity Theft

Identity theft is still one of the most common and most dangerous tax-related scams that fraudsters run. Many consumers rely on reviews to guide their decisions, and online platforms often feature fivestar ratings from BBB as a mark of trustworthiness. This can create a false sense of security, leading individuals to lower their guard against potential scams. These deceptive practices can result in significant financial losses if proper precautions are not taken. As consumers seek to educate themselves, many turn to word of the day examples to expand their vocabulary and comprehension of key financial terms. By doing so, they aim to better understand the language used in various scams, enabling them to identify red flags more effectively. This heightened awareness can significantly enhance their ability to protect themselves from fraudulent schemes.

The purpose of utilizing someone’s personal tax info to masquerade as them is usually to collect on tax refunds and unemployment benefits, as well as other benefits. Scammers may also use your Social Security number to file a fraudulent tax return in your name, or claim your dependents on a tax return of their own.

You may have been a victim of a case of tax-related identify theft if the IRS notifies you about a suspicious tax return, or if you cannot e-file your return because one has already been made with your Social Security number. Keep in mind these are only a few of the signs of identity theft.

2. IRS Phishing

Phishing is the act of extracting sensitive information from a victim online by setting up a fake form or log-in screen. Phishing attempts will generally copy the design or look of an official IRS webpage or form, but there are a few obvious ways in which you can distinguish a phishing attempt from the real deal.

First – check the address of the sender. Most phishing attempts occur over email, and most email services successfully weed out obvious scammers. But if you do receive an email from what seems like the IRS, double- and triple-check the sender’s address to see whether they’re really sending an email from the IRS’s email servers.

Next, look for obvious discrepancies in the email itself. Phishing mails will often feature odd typesetting, misspelling, graphical errors, or contents that make no sense.

Finally, the most obvious clue – the IRS never asks for your information via email. Any email saying you should open the attached file, go to the link on the message, or reply with your log-in information or other sensitive data (including things like your full name, birthdate, and so on) should be ignored, and forwarded to the IRS’s phishing reporting email.

3. Impersonating IRS Personnel

Another common IRS tax scam is a phone call or email wherein the scammer claims to be an IRS employee, demanding that you pay your tax debt. The IRS will never ask you to pay your debt over the phone, nor will they ask for your information via telephone or email. Common ways in which scammers try to extract money from taxpayers for their alleged debt include Google Play gift cards, fake invoices, wire transfers, and escrow payments.

If the IRS wants something from you, they will ask for it via a letter in the mail, not digitally or over the phone. Alternatively, you can request information from the IRS securely over the IRS’s own website. Be sure that you’re on https://irs.gov.

4. Malware and Ransomware

Another common online IRS tax scam is an email from a scammer claiming to represent the IRS, telling you to open the attached file.

Rather than a just form, however, the attachment may be a type of malware that infects your computer and steals information, logs keystrokes, spies on you, utilizes your computer’s resources to mine cryptocurrency, or holds all of your data ransom for an exorbitant cryptocurrency fee.

Tips to Avoid IRS Tax Scams

Tax-related scams are incredibly dangerous. Scammers claiming to be the IRS, or to work with the IRS, can scam people out of their tax refunds, steal their information, sell their sensitive data, or extract financial info from their devices. Be sure to keep yourself safe on the internet by applying the following tips: Understanding the potential consequences of tax-related fraud is crucial for individuals. By being aware of irs audit penalties to avoid, taxpayers can better protect themselves from falling victim to such schemes. Educating yourself about your rights and the proper protocols can further minimize risks associated with these scams.

1. Read Emails Thoroughly

Scam mails are often too good to be true, clearly suspicious, or demand something from you via mail. Don’t click on any links, don’t open attachments, and don’t do what an email says if you aren’t sure it isn’t a scam.

Double-check the sender info, reread the message for signs of a scam, and get a second opinion from someone online if you aren’t sure. If you receive any emails from the IRS, know that if you’re ever notified of anything important, the IRS will have done so via physical mail.

2. Use Multi-Factor Identification

Multi-factor or two-factor identification utilizes multiple different login cues to enter an account. A common example of two-factor identification is providing your username and password, as well as a security code texted to the phone number associated with your account. This adds an additional layer of security to every login and makes it harder for scammers to access your accounts.

3. Be Stingy with Your Info

Double- and triple-check before you use your information online, especially when asked to login somewhere or provide credit card info to make a purchase. Do not share sensitive information via text, email, phone call, video chat, or over public channels.

4. Use Malware Detection and Security Software

Be sure your antivirus is on, and regularly scan your devices for signs of malware. Keep your malware detection and security software updated at all times.

5. Avoid Logging into Accounts in Public

One of the most glaring examples of cognitive dissonance is use of a public WiFi network to log into a private account, or shop and buy goods. Public WiFi networks are completely unsecured and turn your personal data and information – including your credit card info – into easy pickings for scam artists and hackers who are physically near you.

It’s scarily and trivially easy to sit around a coffee shop and steal data from people nearby by snooping through the phones and laptops of public WiFi users.

The best way to minimize the risk of an attack on your privacy and sensitive financial data is to avoid shopping and logging into any accounts on public networks.

6. Using VPN Services

Additionally, you may want to consider using a VPN service whenever you decide to browse the Internet on public WiFi networks, and via 4G/5G. A VPN or virtual private network is a service that reroutes and encrypts any outgoing traffic from your device.

VPNs help disguise your online identity and encrypt the information you send and receive in real-time. It’s not all roses and rainbows – some VPN services are better than others, some don’t offer real-time protection, and some even sell your data themselves. It’s important to choose a service like this with great scrutiny, if you’re considering it at all.

Protecting yourself and your data online can be incredibly difficult. While the IRS reminds us to be careful of what we do on the Internet, it’s important to keep in mind that the simplest things often have the greatest impact.

Enable multi-factor identification wherever available, only access sensitive information on secure networks, browse on websites with SSL certification (https:// rather than http://), and avoid opening suspicious messages, emails, or strange unidentified links.

If you are in need of tax relief services, call the professionals at Rush Tax Resolution today.

Beware of these IRS Dirty Dozen Tax Scams for 2021

Each year, the IRS Dirty Dozen Tax Scams are updated with the most common trends in IRS-related fraud and scams. Here is what to know this year.

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It’s the tax man’s job to ensure that the government gets its legal share – but masquerading as the IRS has been and continues to be a problem for thousands of Americans caught in tax scams year by year. Each year, the IRS puts out an advisory to help taxpayers keep an eye out for the twelve most common and most effective scams, and the forms they might take on. This is called the IRS Dirty Dozen.

Not all of these are tax scams directly aimed at the average taxpayer. They include scams aimed at tax professionals, dubious or unscrupulous services, abusive arrangements, illegal or unprofessional deals, and other illegal or questionable activity that, at the very least, could lead to serious financial problems and identity theft, and at worst, may lead to criminal charges.

What are the IRS Dirty Dozen Tax Scams?

The Dirty Dozen change on a yearly or near yearly basis, and the IRS keeps track of the last few IRS Dirty Dozen tax scams to give taxpayers an idea of what direction the trends have been moving in, and what the future of tax scamming might look like.

Most of these scams revolve around promising taxpayers the impossible, or soliciting information in lieu of serving the IRS, either through threats or promises of tax credits. Let’s go over the most common IRS Dirty Dozen tax scams for 2021, and how to avoid them.

The New IRS Dirty Dozen

This year’s Dirty Dozen will be officially separated into four distinct categories, namely the:

1. 1. “Pandemic-related scams”
  2. “Personal information cons”
  3. “Rues focused on unsuspecting victims”
  4. “Schemes that persuade taxpayers into unscrupulous actions”

In total, the Dirty Dozen this year include:

- Economic impact payment theft:

The economic impact payment, or the stimulus check, was part of the coronavirus aid and recovery measures implemented by the government in 2020. The vast majority of these were paid out automatically by the IRS, usually via mail. They could have been stolen by intercepting mail or looting mailboxes, or through phishing scams aimed at getting into your bank account.

- Phishing scams aimed at tax pros:

While phishing (the use of official-looking emails or proxy sites to steal and harvest login data and sensitive information) is nothing new, an emerging trend in 2021 has been the use of phishing to scam tax professionals in particular. These phishing attempts may revolve around trying to get tax pros to verify Electronic Filing Identification Numbers.

- Impersonator calls:

Sometimes also known as vishing, this tax scam involves impersonating someone from the IRS in order to coerce information or even money through threats of tax liens and debt. Note that the IRS always notifies taxpayers of anything important through a letter and/or notice first and will only call if these notices go ignored. Even so, the IRS will NEVER request sensitive information over the phone. Hang up immediately if the caller is asking for info like your TIN or SSN, or if they request payment via suspicious methods like Google Play or iTunes gift cards.

- Social media scams:

These are examples of identity theft using social media info to trick friends and family into providing further information, as well as malware.

- Ransomware:

Ransomware has been an emerging trend in recent years, forcefully locking access to a computer until a ransom is paid and encrypting (and subsequently deleting) the data on the computer if the demands are not met. These attacks are generally aimed at financial and healthcare organizations.

- Fake charities:

These fake charities may attempt to solicit money for COVID-19 victims, only to disappear once enough people have been scammed to take notice.

- Senior fraud:

Scammers are targeting seniors and immigrants with poor English skills in particular, often via the phone, usually to get them to transfer money to a “friend” or “forgotten family member” in need.

- Offer-in-compromise mills:

An offer in compromise allows taxpayers with a significant tax debt to pay off less than they might owe, if very specific criteria are met. Offer in compromise mills market themselves with the promise that they can always get their clients off on an offer in compromise, only to take their money, run, and disappear, or do the bare minimum for an exorbitant fee.

- Dangerous tax preparation scams:

Tax preparers must be officially recognized and licensed by the IRS via a Preparer Tax Identification Number. Yet not everyone offering tax preparation services has a PTIN. This can be a scam in and of itself, as these unregistered tax preparers might be looking for a quick profit by demanding upfront payments or using fake deductions.

- Unemployment fraud:

These are schemes based on manipulating employers or banks in order to continue to claim benefits they aren’t entitled to.

- Improper claims of business credits:

Taxpayers may claim certain business credits, such as research-related credits, by qualifying for the credit. Claiming it without proper qualifications, however, can lead to trouble with the IRS, including penalties and tax debt.

- Micro-captive schemes:

A micro-captive scheme is based on captive insurance companies, wherein both the insurer and the insured have shared ownership of the company, specially created in cases where the insured did not want to lose out on the tax benefits of insurance when their specific circumstances and risks are not usually covered.

In captive insurance, the insured receives coverage in exchange for greater premiums. This rabbit hole goes further down, and can lead into abusive micro-captive insurance schemes where taxpayers are convinced into paying exorbitant premiums for what amounts to little to no real insurance.

Avoiding Tax Scams in 2021 and Beyond

It is always best to thoroughly exercise caution and be mindful of the IRS Dirty Dozen tax scams. If you aren’t sure that a message or call is really coming from the IRS, or if something sounds too good to be true, or if you’re just plain suspicious of a specific service, then do the reasonable thing: look into it. Call a reputable tax attorney for more information. Contact the IRS itself, ask if what you’ve witnessed is legitimate, and report it if it isn’t.

As a general rule of thumb, note that the IRS isn’t going to ask for personal information or important tax info over the phone or via email. These are almost always attempts at getting the information scammers need to pull off their schemes.

The IRS will either ask you to mail copies of certain documents to addresses that are very clearly an IRS field office (which you can easily verify), or they might ask you to fill certain information out online via their official website and portal, NOT through an email.