The Dirty Dozen: 12 Common Tax Scams
According to a report released by the Treasury Inspector General for Tax Administration, the Internal Revenue Service (IRS) identified over 300,000 fraudulent tax returns during the 2023 filing season, stopping nearly $2.7 billion in refunds.
While these numbers are alarming, there are steps you can take to protect yourself from tax-related scams.
After each tax season, the IRS compiles a list of 12 common scams called the “Dirty Dozen.” The 2023 Dirty Dozen list includes the following scams to watch for during tax season and year-round:
1. Employee Retention Credit Claims
The Employee Retention Credit (ERC) is a refundable tax credit that some eligible businesses and tax-exempt organizations can claim if they had employees affected by the COVID-19 pandemic. Individuals are not eligible to claim this credit.
Look out for third-party representatives or advertisements claiming you are eligible. These could be scammers trying to steal your personal information.
Before claiming, confirm your business or organization’s eligibility with the IRS.
2. Phishing and Smishing
Have you ever received an email or text message claiming to be the IRS during tax season? If you receive one of these unsolicited emails (phishing) or text messages (smishing), delete it.
The IRS will never contact you through email, text, phone, or social media requesting personal information. Most of their communications come through regular mail.
Learn how to spot and avoid phishing and smishing fraud attempts.
3. “Third-Party” Online Account Help
If a third-party representative contacts you and says they can help set up your IRS online account, decline the offer. They could be a scammer wanting access to your personal tax information.
Taxpayers should set up an online account on their own through the IRS website.
4. Fuel Tax Credit Claims
Most taxpayers cannot claim the Fuel Tax Credit intended for off-highway business and farming use. Yet, this doesn’t stop scammers from promoting it.
Look out for third-party representatives encouraging you to claim this credit and offering to help in exchange for a hefty fee. Instead, confirm your eligibility with the IRS or a trusted tax professional before claiming.
5. Fake Charities
If a supposed charity contacts you and expresses an urgent need, pressures you to donate, or asks for donations via gift card or wiring money, this is likely a scam.
Before donating, use reputable websites such as Charity Watch or Charity Navigator to assess the organization’s legitimacy.
And remember, never give out personal information, including your social security number, credit card numbers, and PINs.
6. Shady Tax Preparers
While most tax preparers provide professional services, some may be in business for the wrong reasons.
Warning signs include a tax preparer who charges a fee based on the size of your refund, refuses to sign your tax return, or won’t provide their IRS Preparer Tax Identification Number (PTIN) as required by law.
To help select a reputable and qualified tax preparer, use the IRS’s list of federal tax preparers to ensure yours makes the cut.
7. Social Media Schemes
While social media is great for keeping up with news and trends, scammers use it to promote false information.
Before acting on tax-related information seen on social media, you should confirm its legitimacy with the IRS or a trusted tax professional.
8. Spearphishing
If you’ve ever received a letter from a business or organization you have an account with stating they experienced a data breach, they were likely the victim of a scam known as spearphishing.
This scam involves fraudsters targeting a specific business or organization versus an individual.
The IRS warns tax professionals, businesses, and organizations to watch for emails that include suspicious requests or links, which could be from scammers trying to steal client information.
9. “Offer in Compromise” Mills
The IRS’s Offer in Compromise program helps individuals who cannot pay some or all their tax debts. But look out for “mills” that falsely advertise the program’s requirements or offer to help settle your tax debt in exchange for a fee.
Instead, use the IRS’s Pre-Qualifier tool to see if you are eligible for the Offer in Compromise program.
10. Scams Aimed at High-Income Filers
If a tax preparer or third-party representative encourages you to list false income or property information on your tax return, tell them no and report them to the IRS.
Remember, taxpayers are legally responsible for the information provided on their returns, not the tax preparer or third-party representative. Before acting on such a request, confirm your information with the IRS or a more trusted tax preparer.
11. Tax Avoidance Strategies
These scams involve different tactics, but the scammer’s goal is to convince taxpayers that they can help reduce or eliminate their taxes.
If a third party reaches out offering to help with your tax obligations, decline their offer. Instead, work directly with a tax preparer or the IRS to ensure your taxes are correctly filed.
12. Schemes With International Elements
From hiding income in overseas accounts to invalid foreign retirement accounts and insurance claims, scammers use these tactics to convince taxpayers they can avoid U.S. taxes.
Never take part in these types of services or transactions. Rather, seek advice from a trusted professional or the IRS.
How To Report Tax Scams
If you encounter a tax scam at any point throughout the year, you should report it to the IRS so they can investigate.
You can also learn more about common scams and ways to protect yourself in the Connexus Security & Fraud Center.