Most Common Tax Scams in 2020


By: Tax Hotline
Summer 2020 (Vol. 38, No. 2)

“The Dirty Dozen” is a list of current tax scams compiled and issued every year by the IRS. This year scam artists are stepping up their game during the pandemic. A good rule of thumb is to beware of anyone new who initiates contact about your taxes via email or phone. The IRS will never initiate contact with taxpayers via phone, email, text, or social messaging.

Here are this year’s “Dirty Dozen” tax scams:

1. PHISHING. These phishing schemes use letters, emails, text, and messaging with keywords such as “coronavirus,” “COVID-19” and “Stimulus” to trick you into giving personal or financial information. Ignore these scams. Don’t call, text or hit reply for more details and don’t click on unsolicited links or files.

2. FAKE CHARITIES. Beware of unsolicited charity drives. Examine the senders email address or website very carefully. Bogus websites use names remarkably similar to legitimate charities to trick people to send money or provide personal financial information. They may even entice you to apply as a beneficiary of moneys they have collected. Legitimate charities will provide their Employer Identification Number (EIN) upon request. If in doubt, use the search tool on IRS. gov to verify.

3. THREATENING PHONE CALLS. Scam phone calls, including those threatening arrest or license revocation if the victim does not pay a bogus tax bill, are scary but completely fake. The IRS will never threaten a taxpayer or surprise him or her with a demand for immediate payment. Nor will it threaten, ask for financial information over the phone, or call you about an unexpected refund or Economic Impact Payment.

4. SOCIAL MEDIA SCAMS. The scammer uses information you share online to convince you that you are dealing with a person close to you. They may contact you by email, text or social media messaging making conversation or requests that appear to be from your family, friends or co-workers. By watching your social media, they can calculate what causes, products or services are most likely to peak your interest. They use clever covers to trick you into giving personal and financial information they can use to commit tax identity theft.

5. ECONOMIC IMPACT PAYMENT OR REFUND THEFT. Recent victims of this type of scam include residents of nursing homes and other care facilities where individuals and businesses may be diverting stimulus payments as payments for services. Economic Impact Payments generally belong to the recipients, not the organizations providing the care.

6. SENIOR CITIZEN FRAUD. Seniors are more likely to be targeted by scammers than other segments of society. Seniors can be proactive and let service providers know upfront they have a trusted advisor keeping an eye out for potential scammers. Any good provider will allow time to consult.

7. TARGETING NON-ENGLISH SPEAKERS. IRS impersonators and other scammers also target groups with limited English proficiency. The most common is a “robocall” threatening deportation, jail or revocation of driver’s license. These con artists may have some of the taxpayer’s information which makes the phone calls seem more legitimate. Taxpayers should ignore these threats and not engage the scammers.

8. “GHOST” TAX RETURN PREPARERS. This year, with many tax professionals impacted by COVID-19 and their offices potentially closed, taxpayers should take particular care in selecting a credible tax preparer. Ghost preparers are in business to steal your tax identity. A red flag to look for is they will not add their name as the paid preparer on your return. By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on returns.

These scammers may also target those who do not need to file by promising big refunds based on made up tax laws. Avoid preparers who ask you to sign a blank return, promise a big refund before looking at your records or charge fees based on a percentage of the refund. Remember, you are ultimately responsible for the accuracy of your tax return, regardless of who prepares it.

9. OFFER IN COMPROMISE (OIC) MILLS. Taxpayers need to be wary of misleading tax debt resolution companies that can exaggerate chances to settle tax debts for “pennies on the dollar”. The IRS does have a forgiveness program but not everyone qualifies. For example, in 2019, there were 54,000 OICs submitted to the IRS. The agency accepted 18,000 of them. Be cautious of companies who oversell the program to unqualified taxpayers just to collect a hefty fee.

10. FAKE PAYMENTS WITH REPAYMENT DEMANDS. A con artist steals or obtains a taxpayer’s social security numbers or business ITIN and bank account information. The scammer files a bogus tax return and has the refund deposited into the taxpayer’s checking or savings account. Then the taxpayer is told that there’s 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 amount of the refund. Of course, a call out of the blue is a red flag, but also, the IRS would never demand a payment by a specific method such as gift cards.

11. 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 Business Email Compromise (BEC) or Business Email Spoofing (BES). Currently, two of the most common types of these scams are the gift card scam and the direct deposit scam.

In the gift card scam, a compromised email account is often used to send a request to purchase gift cards in various denominations. In the direct deposit scheme, the fraudster may have access to the victim’s email account (also known as an email account compromise or “EAC”). They may also impersonate the potential victim to have the organization change the employee’s direct deposit information to reroute their deposit to an account the fraudster controls.

BEC/BES scams include requests for wire transfers, payment of fake invoices as well as others and look authentic. The Direct Deposit and other BEC/BES variations should be forwarded to the Federal Bureau of Investigation Internet Crime Complaint Center (IC3). Form W-2 scams be reported to phishing@irs.gov.

12. RANSOMWARE. Malware is a form of invasive software that is often frequently inadvertently downloaded by the user. Once downloaded, it tracks keystrokes and other computer activity. Once infected, ransomware looks for and locks critical or sensitive data with its encryption. In some cases, entire computer networks can be adversely impacted. These criminals frequently use anonymous messaging platforms and demand payment in virtual currency such as Bitcoin. Cybercriminals might use a phishing email to trick a potential victim into opening a link or attachment containing the ransomware. These may include email solicitations to support a fake COVID-19 charity. Cybercriminals also look for system vulnerabilities where human error is not needed to deliver their malware.