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Top Tax Scams to Watch Out For

Top Tax Scams to Watch Out For

Jun 23, 2021 | By Isaac O'Bannon | 0 Comments

Topics: Tax Day, Accounting, Taxes, Accountants

While tax season may finally be over for most Americans, it’s never really over for tax professionals. After May 17 this year (usually April 15), most tax pros immediately start completing tax returns for clients who needed to file extensions.

Tax scammers don’t really take a break either, and the tax deadline does not stop them from trying to scam people out of their information or their tax refunds.

These are the top tax scams for 2021, according to the IRS.


Phishing


One of the oldest threats, phishing is when the scammers send emails or texts pretending to be from the IRS. They ask taxpayers to “click here”, and log in with their SSN or other  information. The website, however, is fake, but designed very similar to the IRS website. Remember: the IRS will never send these types of messages via email or text, and will never call out of the blue. First contact from the IRS will always be via postal mail. The IRS Criminal Investigation division continues to see an increase in phishing related to the COVID
pandemic and the economic stimulus payments.


Fake Charities


Scammers like to use disasters and emergencies, like earthquakes and hurricanes – and even the COVID pandemic – to create fake charities and gain sympathy (as well as money). These scams often start by phone, email, or text, with links to websites that look like real charity groups. Scammers often try to use names and language similar to state and federal agencies like FEMA or the IRS. They are not associated with these agencies, however, and are just trying to rake in money. Officially recognized charities will provide an EIN number if requested. You can also check to see if a charity is real by using a search tool on the IRS website: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search


Threatening Phone Calls


Once again, the IRS will never, ever initiate interaction with a taxpayer over the phone or by email. Any calls or messages saying the IRS is coming after you is a scam. And they are often poorly recorded robo-calls, which use nonstandard American English phrasing. If ever in doubt, ask a tax pro or call the IRS.


Social Media and Messaging Threats


Social media scams, often related to COVID, stimulus payments, or other natural disasters, are also a growing threat and can lead to theft of your identity. These scams sometimes involve a scammer setting up an email address, Facebook profile, or other social media account that looks like one of your friends or relatives, and then convincing the victim that they are in desperate need of financial help.

Once the victim falls for the trap, they can be tricked into sharing financial information, or clicking links that might be malware. The malware then goes through their contacts to identify more potential victims. If a message from someone sounds off, check with that person via a different method.


Stimulus Payment or Refund Theft


Scammers are always looking for ways to get tax refunds, and this year they made efforts to collect taxpayer stimulus payments as well. The oldest method for stealing tax refunds is by filing a fake return with the taxpayer’s real name and SSN, but filling it with false income and tax credit claims, and then having the refund sent to their address or PO Box.

The taxpayer may not find out until they file their own return (which would be rejected), or they receive a notice from the IRS. The best way to avoid this is to file as early as possible. With the stimulus payments, older Americans, and especially those in nursing homes and other care facilities, were targeted heavily by these scammers.


Senior Fraud


In general, seniors are often the most targeted age group for tax and financial scams, and their loved ones should help them stay safe by reinforcing safe data practices. Seniors need to be alert for a continuing surge of fake emails, text messages, websites, and social media attempts to steal personal information.


Scams Targeting People Who Don’t Speak English


Those with limited English proficiency, or who are not yet as accustomed to American tax processes, are also more susceptible to being defrauded. These scammers, posing as IRS or other government agents, also often use threats of criminal action or deportation if the victim doesn’t provide personal or financial information. Once again, even if the person or automated message has some of your information – such as your address or even the last four digits of your SSN – it is not safe to follow any directions the caller specifies. Hang up and, if in doubt, contact a tax professional or the IRS.


Bad Tax Preparers


Tax preparers who promise bigger refunds, or tell their clients to claim certain credits or deductions that they don’t qualify for, are a challenge for taxpayers and the IRS. One big flag that taxpayers should watch out for are preparers who do not sign the “preparer signature” section of the tax return. To be safe, use a return preparer who is a CPA, Enrolled Agent, tax attorney, or a member of the National Association of Tax Professionals.


Ransomware


Another reason to avoid clicking links in emails or messages from unknown senders (or those who you aren’t absolutely sure of) is that you could accidentally install a software program on your computer or device that will then lock all of your content, making your device or computer unusable. If your vital business or personal data is on there, you won’t be able to access it, unless you give the attacker a ransom payment.

Of course, even if you do give them what they want, they still may not release your system, or demand more money. They are scum, after all. So, be safe and a little cynical when it comes to clicking links.

The Author

Isaac O'Bannon

Isaac M. O’Bannon is the managing editor of CPA Practice Advisor and has been advising accounting and technology firms for 20 years.

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