Common Tax Scams and How to Avoid Them

For the past several years, the IRS has been publishing “The Dirty Dozen,” a list of twelve tax scams the IRS wants taxpayers to look out for. This yearly list has “well-known” scams that criminals try year after year, usually around tax time. The telephone seems to be the best tool for these scammers. Even as landline usage disappears across the country, these scammers still call our smartphones. 

Today, however, most of the Scams listed on “The Dirty Dozen” center on some type of cybercrime, making the IRS’s role in fighting these scams more important than ever. To this end, the IRS developed the yearly Dirty Dozen list into a public service campaign that does its part to warn taxpayers, especially toward the end of January, when employers typically start sending employees their W-2s. 

As tax season ends, and we drift into the summer months, we shouldn’t let our guards down. Though not as expected after tax season, tax scams happen year-round, notably crucial because our society is always connected to the internet. Today’s tax scams integrate modern technology and old-school communication methods to scare people out of their money. Here’s our list of common tax scams.

Common Tax Scams

An unfortunate aspect of living our cyber-connected lives is the amount of exposure our digital footprints endure over our lifetimes. We are probably on some list somewhere of people to contact, commonly known as sales or leads lists. Tax scammers take these types of lists either purchased legally or stolen from platforms like the dark web. Consequently, most modern tax scams involve the internet in some way.

Pandemic Related Scams

Natural disasters and other catastrophic events like a deadly pandemic bring out the worst capitalist behaviors in some people. These scammers believe it’s fair game to act on behalf of some charity or organization helping people cope with the Covid-19 pandemic. The hook, or the thing that grabs your attention, is a narrative that tugs at your emotions. 

Our financial institutions and government agencies, like the IRS, don’t use hooks to get your attention. Charities and nonprofits do use those emotional hooks so keeping safe as you make online donations means being vigilant and careful about which links you follow online.   

Phishing For Personal Information

The IRS warns that we should be on the lookout for email-based scams that come from trusted sources like the IRS and other trusted institutions like banks. These emails are phishing attacks against you where the cybercriminal wants you to click a link in the email. The email is counterfeit! Clicking the link takes you to their website, where the cybercriminal takes your personal information. 

These types of phishing attacks play on our fears of the IRS coming after us if we don’t comply, a prospect that is particularly daunting if we’re worried about the Covid-19 pandemic. The best way to avoid phishing attacks from anyone is not to open the like in the email. Our trusted institutions know this and don’t reach out for contact with these types of emails. You might be thinking, and sure everyone knows this. Unfortunately, email phishing is still a leading tool for cybercriminals. 

Phone Scams

As if we aren’t all scared already because of the pandemic, the classic phone scam is more popular than ever, probably because more people are home these days. These scams are nefarious because they use threatening language to intimidate people into paying a tax bill. These phone scams support false claims the government is a bully!

Taxpayers need to know:

• The IRS does not threaten people. They don’t need to because they are part of the government of laws they themselves must follow. If they do take action, you get a letter in the mail and the opportunity to appeal or respond in an appropriate way.
• IRS agents do not call people to collect or give out unexpected payments and refunds.
• The IRS doesn’t use the local police in any capacity. 

The IRS suggests you report a phone scam call using resources available on their website. In the meantime, it wouldn’t hurt to get a financial checkup from a CPA like Peter B. Scala. During the checkup you can discuss these tax scams and ways to provide protection for you and your family.

Social Scams

Today’s tax scammers are going beyond phone calls and emails. Some scammers hack into social media accounts and impersonate someone who is vulnerable to penalty. The purpose is to intimidate friends and others in their social network so that they pressure you to pay a tax bill. Some scammers even hack into your friend’s accounts and impersonate them.

These types of scams are particularly harmful to those with little to no social media experience like our older citizens who are in better positions to pay hefty back tax bills. It doesn’t take much to make a Twitter and Facebook post look official.

Closing Thoughts and Observations

One of the best things you can do to protect you and your family and friends from tax scams is be vigilant about your cyber surroundings as you interact with the physical world. Phishing attacks that look for ways to steal personal information are as old as email messaging technology. NOT clicking on links in emails that seem suspicious is advice as old as the technology and something that should now be common knowledge.

That said, official-looking emails confuse some of us because most of us want to follow laws. The IRS doesn’t use email for tax collection. Any email that does is a scam. That is something anyone can remember. Vigilance also includes knowing things like how tax laws work and how you have rights as a taxpayer should you ever disagree with the IRS. In these cases it helps to have a CPA like Peter B. Scala on your side.