The IRS Announces “Dirty Dozen” Tax Scams for 2021

Transcript of Podcast Episode 139

The Internal Revenue Service recently announced its “Dirty Dozen” tax scams list for 2021 with a twist. This year, the biggest emphasis is on an increase in pandemic-related scams like the theft of economic impact payments.

Aside from that, there are three other general categories of scam this year:

• Personal information scams, which include phishing, ransomware and what is known as phone “vishing.”
• Fake charities and senior or immigrant fraud.
• Schemes that persuade taxpayers into unscrupulous actions.

So here is the complete list:

1. Economic Impact Payments. The IRS has observed an increase in the number of attempts to steal direct payments made as part of pandemic relief. They have advised people to be wary of unexpected phone calls, text messages and emails. As may be expected, the IRS advises us to ignore random phone calls and delete any suspicious text messages or emails, particularly those inquiring about bank accounts or requesting to verify account data. They also urge people not to respond to or open any such correspondence.

2. Fraudulent Unemployment Claims. There has also been an increase in scammers who use stolen information to apply for fake unemployment benefits. The IRS says that you could end up receiving a Form 1099-G for unemployment payments that you never asked for and didn’t receive.

3. Tax-Related Phishing Scams. Phishing is a common scam where someone uses fake emails and fake websites to try and get personal information from you. The emails are made to look as legitimate as possible and are often used as a way to collect financial account information. The information is then used to collect benefits in your name for the benefit of a scammer.

4. Social Media Scams. Tricksters have become adept at using social media scams to facilitate tax-related identity theft. Social media accounts are a way for them to get access to your friends and family. They then use these connections to link to things like fake charities.

5. Impersonator phone calls/vishing. Phishing by phone—that is, by voice—is known as “vishing.” More often than not, these calls threaten the victim with arrest, deportation or license revocation unless the victim pays what is in fact a fake bill, such as a tax bill.

6. Ransomware. Ransomware has been in the news a lot lately, and with good reason. But it’s not just a concern for multi-billion dollar corporations. With enough access, criminals can find weaknesses to infect a person’s computer, then demand payment to free up the systems and get you back up and running.

7. Fake Charities. Natural disasters bring out the best in some people, and the worst in others. Scammers know how to exploit generous people through the use of fake charities. A fake charity can be used to steal from people who are only trying to help, and the IRS reports that there has been an uptick in fake COVID-19 charities this year.

8. Immigration/Senior Fraud. Elder abuse takes many forms, and scammers often look at senior citizens as relatively easy prey; thus senior citizens tend to get targeted more often. Criminals also like to target people with limited English proficiency.

9. “Offer In Compromise” Mills. Compromise mills are organizations that will work with a taxpayer to settle a tax debt. Generally, in the right circumstances they can arrange to pay off a tax debt at a reduced amount. But some of these organizations charge high fees to people who may not qualify for a compromise from the IRS. Note that the IRS has an online calculator to see whether someone might qualify for a negotiated compromise (https://irs.treasury.gov/oic_pre_qualifier/).

10. Unscrupulous Tax Return Preparers. According to the IRS, “A paid tax return preparer is primarily responsible for the overall substantive accuracy of your return and by law, is required to sign the return and include their preparer tax identification number (PTIN) on it.” So-called “ghost” preparers are people who charge fees but avoid any responsibility by not signing the return.

11. Unemployment Insurance Fraud. Unemployment insurance is the source for two of the 12 common scams. In this case, the concern is individuals who act in coordination with or against employers and financial institutions to get unemployment assistance to which they are not entitled. An example of this would be a situation where an individual returns to work but fails to report the income, with the hope of continuing to receive unemployment benefits.

12. Promoted “Abusive Arrangements.” The IRS has recently seen an uptick in what are called “abusive arrangements.” This is where a promoter, sometimes referred to as a syndicator, sets up tax shelters that are, in fact, fraudulent. These arrangements can take many forms, including charitable gifts of what are known as conservation easements, misuse of business tax credits, and abusive captive insurance arrangements.

The IRS ends its discussion of this list with some advice: multi-factor authentication is a good way to better protect online accounts. One example of how multi-factor authentication works is to require a security code sent to a mobile phone in addition to the username and password. This, in theory, should make it more difficult for a scammer to steal your information.

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