Tim’s Tax News on the Tenth – August 2020

Last week the IRS released its yearly list of the most prevalent tax scams it sees as being perpetrated against taxpayers. This “Dirty Dozen" tax scam list is by no means all-inclusive as to the types of scams being run by criminals against taxpayers. This year, taxpayers should be especially, watchful for aggressive schemes related to COVID-19 relief, including Economic Impact Payments.

Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers through email about a tax bill, refund, or Economic Impact Payment. Do not click on links claiming to be from the IRS. Be wary of emails and websites purporting to be authorized by the IRS − they are more than likely nothing more than scams to steal personal information.

Fake charities: Criminals frequently exploit natural disasters and other situations, such as COVID-19, by setting up fake charities to steal from well-intentioned people trying to help in times of need. Fraudulent schemes normally start with unsolicited contact by phone, text, social media, email, or in-person using a variety of tactics.

Threatening impersonator phone calls: IRS impersonation scams come in many forms. A common one remains fake threatening phone calls from a criminal claiming to be with the IRS. The agency will never threaten a taxpayer or surprise them with a demand for immediate payment. Scam phone calls include those threatening arrest, deportation or license revocation if the victim does not pay a fake tax bill.

Social media scams: Taxpayers need to protect themselves against social media scams, which frequently use events such as COVID-19 to try tricking people. Social media enables anyone to share information with anyone else on the Internet. Scammers use this information as ammunition for a wide variety of scams. These include emails where scammers impersonate someone's family, friends, or co-workers.

Economic Impact Payment or refund theft: This year, criminals turned their attention to stealing Economic Impact Payments. Many of these scams are identity theft-related. Criminals file false tax returns or supply false information to the IRS to divert refunds to wrong addresses or bank accounts.

Senior fraud: Senior citizens, their friends and family need to be on alert for tax scams targeting older taxpayers. Their growing comfort with technology, including social media, gives scammers another means of taking advantage of them. Phishing scams linked to COVID-19 have been a major threat this year. Seniors should be on alert for a continuing surge of fake emails, text messages, websites, and social media attempts to steal personal information.

Scammers targeting individuals with limited English proficiency: IRS impersonators and other scammers are targeting groups with limited English proficiency. These scams are often threatening in nature. Phone scams pose a major threat to people with limited access to information, including individuals not entirely comfortable with the English language.

A common one remains the IRS impersonation scam where a taxpayer receives a telephone call threatening jail time, deportation or revocation of a driver's license from someone claiming to be with the IRS. Recent immigrants often are the most vulnerable to these scams. They should ignore these threats and not engage the scammers.

Dishonest return preparers: Taxpayers should avoid so-called "ghost" preparers who expose their clients to potentially serious filing mistakes, as well as, possible tax fraud and risk of losing their refunds. Ghost preparers do not sign the tax returns they prepare for taxpayers. They may print the tax return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost preparer will prepare but not digitally sign as the paid preparer. With many tax professionals affected by COVID-19 and their office locations potentially closed, taxpayers should be especially careful to select a credible tax preparer.

Offer in Compromise mills: Taxpayers need to be cautious of misleading tax debt resolution companies that can exaggerate chances to settle tax debts for "pennies on the dollar" through an Offer in Compromise. Dishonest companies oversell the program to unqualified candidates so they can collect a large fee from taxpayers already struggling with debt. These scams are commonly called OIC "mills," which cast a wide net for taxpayers, charge them pricey fees and churn out applications for a program they are unlikely to qualify for.

Fake payments and repayment demands: A con artist will steal a taxpayer’s identity and bank account information. Then the con artist will file a false tax return and will have the refund deposited into the taxpayer's bank account. Once the direct deposit hits the taxpayer's account, the fraudster places a call to them, posing as an IRS employee. The taxpayer is told that there has been an error and that the IRS needs the money returned immediately or penalties and interest will result. The taxpayer is told to buy specific gift cards for the refund amount.

Payroll and HR scams: Tax professionals, employers, and taxpayers need to be on guard against phishing designed to steal Form W-2s and other tax information. These are called Business Email Compromise or Business Email Spoofing. These scams have used a variety of tactics including requests for wire transfers or payment of fake invoices.

Ransomware: This is malicious software that is often downloaded by the user after clicking on a malicious attachment that encrypts their data making their data inaccessible. In some cases, entire computer networks can be affected. The IRS and its Security Summit partners have advised tax professionals and taxpayers to use the free, multi-factor authentication feature being offered on tax preparation software products.

If you would like more details, please do not hesitate to call our office. Our office has been successful in helping taxpayers with IRS and IDOR collection problems for over 28 years. If you have a tax or debt problem, please contact me at 847-705-9698 or thughes@lavellelaw.com and find out how we can help you.

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Lavelle Law, Ltd. is registered with the Illinois Department of Financial and Professional Regulation as an approved continuing education provider for CPE for CPAs and Enrolled Agents. If your organization is seeking CPE courses in the area of Business Law, Innocent Spouse Relief, IRS Collections, Tax Scams (including ID Theft) or other areas in tax law that can be taught at your office, please contact me at thughes@lavellelaw.com.