IRS Warning About Tax Scams for 2021

The Annual “Dirty Dozen” Tax Scams List

The IRS announced its “Dirty Dozen” list for 2021 with a warning for taxpayers, tax professionals, and financial institutions to be on the lookout for these 12 nefarious scams.

This year’s “Dirty Dozen” are separated into 4 separate categories:

• Pandemic-related scams (like Economic Impact Payment theft)
• Personal information cons (including phishing, ransomware and phone “vishing”)
• Ruses focusing on unsuspecting victims (like fake charities and senior/immigrant fraud)
• Schemes that persuade taxpayers into unscrupulous actions (such as Offer In Compromise mills and syndicated conservation easements)

“We provide this list to alert taxpayers about common scams that fraudsters use against their victims,” said IRS Commissioner Chuck Rettig. “We continue to see scam artists use the pandemic to steal money and information from honest taxpayers in a time of crisis. At the IRS, we are dedicated to stopping these criminals, but it’s up to all of us to remain vigilant to protect ourselves and our families.”

Pandemic-Related Scams

These schemes are carried out by fraudsters who are trying to take advantage of the COVID-19 crisis.

1. Stimulus Check Theft

Some identity thieves try to steal Economic Impact Payments (EIPS, also known as stimulus checks) from individuals. The IRS warns taxpayers to look out for any text messages, random incoming phone calls, or emails inquiring about bank account information or requesting recipients to click a link or verify data. It’s also important to be alert to mailbox theft.

>> Check the Status of Your Stimulus Payment

2. Unemployment Benefits Fraud

Scammers take advantage of the Coronavirus pandemic by filing fraudulent claims for unemployment benefits using stolen information of individuals who had not filed claims, and payments for these fraudulent claims go to the identity thieves. If you receive a Form 1099-G reporting unemployment compensation that you didn’t get, you should contact your appropriate state agency for a corrected form.

Personal Information Scams

Some unscrupulous individuals seek to obtain personal information for the purpose of tax-related identity theft. This may be done through a phone call, text message, or email. The con artist tries to convince the recipient that they need to provide Social Security numbers, bank account or credit card information, or passwords. The scheme may also include sending web links that once clicked on can download malicious software that collects personal data.

3. Tax-Related Phishing Scams

Phishing scams target individuals with communications that appear to come from legitimate sources. Scammers used this to collect victims’ personal and financial data, and potentially infect their digital devices by getting the recipient to unknowingly download malicious programs. Cybercriminals usually send these phishing communications by email, but may also use text messages, social media posts, and other messaging apps/services.

4. Impersonator Phone Calls (Vishing)

There has been an increase in voice-related phishing, or ‘vishing,’ particularly from scams related to federal tax liens. Always be wary of unexpected phone calls asking for personal financial information. For those who receive telephone calls out of the blue, you should ask questions of the caller without providing any personal information. If in doubt, hang up immediately.

5. Social Media Scams

The basic element of social media scams involves convincing a potential victim that they are communicating with a person close to them that they trust via email, text, or social media messaging. Fraudsters use social media to lurk on accounts and extract personal information that can be used against a victim. They may send emails impersonating family members, friends, or co-workers. Social media scams have led to tax-related identity theft.

6. Ransomware

Ransomware is a form of malicious software (“malware”) that’s designed to block access to a computer system or data. The scammer then extorts ransom payments from victims in exchange for decrypting the information and restoring victims’ access.

Tax Scams Focusing on Unsuspecting Victims

The IRS continues its “Dirty Dozen” tax scams with a warning for people to look out for predators using tax-related schemes, ranging from fake charities to scams targeting seniors and immigrants.

7. Fake Charities

Taxpayers are advised to be on the lookout for fraudsters who set up fake charitable organizations to take advantage of the public’s generosity. Common phone schemes involve requesting donations for disaster relief efforts. Always check out a charity before you donate, and never feel pressured to give immediately.

RELATED: Tax Strategies for Charitable Donations

8. Immigrant & Senior Fraud

IRS impersonators and other fraudsters tend to target senior citizens  as well as groups with limited English proficiency. These scams are usually threatening in nature. It’s important to remember that the first contact with the IRS will usually be through USPS mail, not over the phone. Legitimate IRS employees will not threaten to revoke licenses or have a person deported.

Schemes That Persuade Taxpayers Into Unsound or Illegal Actions

Some scams focus on misleading people into doing something illegal or tricking them in order to take something.

9. Offer in Compromise “Mills”

Offer in Compromise mills distort the IRS program, mislead taxpayers who cannot meet the requirements, and charge excessive fees. Be on the lookout for promoters that claim you can use their services to settle with the IRS for “pennies on the dollar” or that there’s a limited time to resolve your debts.

10. Unscrupulous Tax Return Preparers

Some tax preparers will not sign the returns they prepare, which is against the law. This could be a red flag that the preparer is trying to make a quick profit by promising a large tax refund or charging fees based on the amount of the refund. Be sure to choose your tax preparer wisely.

>> File Your Taxes Online

11. Unemployment Insurance Fraud

Unemployment fraud typically involves people acting to receive state/local assistance to which they are not entitled. This may be done in coordination with or against employers and financial institutions. Scams related to unemployment insurance include: identity-related fraud, employer-employee collusion fraud, misrepresentation of income fraud, fictitious employer-employee fraud, and insider fraud.

12. Promoted Abusive Arrangements

The last of the “Dirty Dozen” tax scams covers abusive arrangements, such as syndicated conservation easements and abusive micro-captive insurance arrangements. These deals are usually promoted by scammers who make false claims about their legitimacy and charge extremely high fees.

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