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Tax & AccountingJune 14, 2022

IRS continues its list of the 2022 dirty dozen transactions and tax avoidance schemes

The Internal Revenue Service has added to its 2022 Dirty Dozen scams warning list, starting off with a reminder that criminals are still using the COVID-19 pandemic to steal people's money and identity with bogus emails, social media posts and unexpected phone calls, among other things.  

Other tax avoidance schemes that the IRS covered in this second release of the 2022 Dirty Dozen list include fake charities, bogus calls, texts, emails and online posts, and identity theft. 

The agency stresses that these scams take a variety of forms, including using unemployment information and fake job offers to steal money and information from people. All of these efforts can lead to sensitive personal information being stolen. Scammers often use this data to file fraudulent tax returns. 

We covered the first four of the 2022 annual Dirty Dozen tax avoidance schemes in this article earlier in the month.

2022 IRS Dirty Dozen #5 – COVID-19 pandemic scare tactics

A common scam the IRS says it continues to see involves the use of the COVID-19 pandemic. Common examples (covered in more detail below) include Economic Impact Payment and tax refund scams, unemployment fraud leading to inaccurate taxpayer 1099-Gs, and fake employment offers posted on social media.  

"Scammers continue using the pandemic as a device to scare or confuse potential victims into handing over their hard-earned money or personal information," said IRS Commissioner Chuck Rettig. "I urge everyone to be leery of suspicious calls, texts and emails promising benefits that don't exist."

Economic Impact Payment and tax refund scams

Identity thieves who try to use Economic Impact Payments (EIPs), also known as stimulus payments, are a continuing threat to individuals.  

Similar to tax refund scams, taxpayers should watch out for these tell-tale signs of a scam: text messages, random incoming phone calls or emails inquiring about bank account information, requesting recipients to click a link or verify data should be considered suspicious and deleted without opening. This includes not just stimulus payments, but tax refunds and other common issues. 

The IRS will NOT initiate contact by phone, email, text or social media asking for Social Security numbers or other personal or financial information related to Economic Impact Payments.  

Also be alert to mailbox theft. Routinely check your mail and report suspected mail losses to postal inspectors. 

Reminder: The IRS has issued all Economic Impact Payments. Most eligible people already received their stimulus payments. People who are missing a stimulus payment or got less than the full amount may be eligible to claim a Recovery Rebate Credit on their 2020 or 2021 federal tax return. Taxpayers should remember that the IRS website, IRS.gov, is the agency's official website for information on payments, refunds and other tax information.

Unemployment fraud leading to inaccurate taxpayer 1099-Gs

Because of the pandemic, many taxpayers lost their jobs and received unemployment compensation from their state. However, scammers also took advantage of the pandemic by filing fraudulent claims for unemployment compensation using stolen personal information of individuals who had not filed claims. Payments made on these fraudulent claims went to the identity thieves. 

Taxpayers should also be on the lookout for a Form 1099-G reporting unemployment compensation they didn't receive. For people in this situation, the IRS urges them to contact their appropriate state agency for a corrected form. If a corrected form cannot be obtained so that a taxpayer can file a timely tax return, taxpayers should complete their return claiming only the unemployment compensation and other income they actually received. See Identity Theft and Unemployment Benefits for tax details and DOL.gov/fraud for state-by-state reporting information.

Fake employment offers posted on social media

There have been many reports of fake job postings on social media. The pandemic created many newly unemployed people eager to seek new employment. These fake posts entice their victims to provide their personal financial information. This creates added tax risk for people because this information in turn can be used to file a fraudulent tax return for a fraudulent refund or used in some other criminal endeavor.”

2022 IRS Dirty Dozen #6 – creating fake charities to collect donations

Another common scam is the use of fake charities. The agency lists these tips to help avoid donating to these fake charities. 

  • Individuals should never let any caller pressure them. A legitimate charity will be happy to get a donation at any time, so there's no rush. Donors are encouraged to take time to do the research. 
  • Potential donors should ask the fundraiser for the charity's exact name, web address and mailing address, so it can be confirmed later. Some dishonest telemarketers use names that sound like large well-known charities to confuse people. 
  • Be careful how a donation is paid. Donors should not work with charities that ask them to pay by giving numbers from a gift card or by wiring money. That's how scammers ask people to pay. It's safest to pay by credit card or check — and only after having done some research on the charity.

2022 IRS Dirty Dozen #7 – bogus calls, texts, emails and online posts

Suspicious communications in all its forms have been used for years and are included in this year’s dirty dozen. 

Commissioner Rettig states. "If you are surprised or scared by a call or text, it's likely a scam so proceed with extreme caution. I urge everyone to verify a suspicious email or other communication independently of the message in question."

2022 IRS Dirty Dozen #8 – identity theft

As part of the Security Summit effort with the states and the nation's tax industry, the IRS indicates that great strides have been made in reducing tax-related identity theft. But says it remains a serious threat to taxpayers and tax professionals who don't adequately protect Social Security numbers (SSN) and other personal information. 

Here are some common scams the IRS says it continues to see and provides guidance on how to proceed if you face any of these situations.

Text message scams

These scams are sent to taxpayers' smartphones and can reference things like COVID-19 and/or "stimulus payments." These messages often contain bogus links claiming to be IRS websites or other online tools. Other than IRS Secure Access, the IRS does not use text messages to discuss personal tax issues, such as those involving bills or refunds. The IRS also will not send taxpayers messages via social media platforms. 

If a taxpayer receives an unsolicited SMS/text that appears to be from either the IRS or a program closely linked to the IRS, the taxpayer should take a screenshot of the text message and include the screenshot in an email to [email protected] with the following information:

  • Date, time and time zone they received the text message
  • Phone number that received the text message

The IRS reminds everyone NOT to click links or open attachments in unsolicited, suspicious or unexpected text messages whether from the IRS, state tax agencies or others in the tax community.

Email phishing scams

The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS initiates most contacts through regular mail. If a taxpayer receives an unsolicited fraudulent email that appears to be from either the IRS or a program closely linked to the IRS, report it by sending the email as an attachment to [email protected] The Report Phishing and Online Scams page at IRS.gov provides complete details.

Phone scams

The IRS does not leave pre-recorded, urgent or threatening messages. In many variations of the phone scam, victims are told if they do not call back, a warrant will be issued for their arrest. Other verbal threats include law-enforcement agency intervention, deportation or revocation of licenses. 

Criminals can fake or "spoof" caller ID numbers to appear to be anywhere in the country, including from an IRS office. This prevents taxpayers from being able to verify the caller's true number. Fraudsters also have spoofed local sheriff's offices, state departments of motor vehicles, federal agencies and others, to convince taxpayers the call is legitimate. 

The IRS (and its authorized private collection agencies) will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone. 

Generally, the IRS will first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties. For anyone who doesn't owe taxes and has no reason to think they do: Do not give out any information. Hang up immediately.”

Taxpayers need to be more vigilant than ever

Clearly, we all face increased risk of identity theft and attempts of schemes to fraudulently separate us from our cash and other assets. Taxpayers must be particularly vigilante when contacted by anyone they don’t know regarding requests for personal information or donations. The IRS guidelines help in pointing out red flags to alert all of us of common schemes scammers are using. However, there are many others. These criminals are very creative and continually create new ways of defrauding taxpayers and others. If you have any concerns that you have been contacted by a scammer, you should check with your tax adviser.

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Mark Friedlich
Vice President of US Affairs for Wolters Kluwer Tax & Accounting
Mark Friedlich, a CPA & tax lawyer, is the Vice President of US Affairs for Wolters Kluwer Tax & Accounting. He is a member of the U.S. Senate Finance Committee’s Chief Tax Counsel’s Advisory Board, advisor to 14 state taxing authorities, and has been a member of the American Bar Association’s Tax Section and AICPA’s Tax Section leadership teams. Prior to joining Wolters Kluwer he was a COO and Principal at PwC.

 

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