Alerts and Updates

IRS Warns of Ongoing Tax Scams

March 27, 2019

As we have been cautioning our clients and friends for years now, never respond to an unsolicited email, unsolicited text or unsolicited phone call. 

The IRS Dirty Dozen Scams for 2019 can be encountered at any time during year, but they peak during tax season. Unfortunately, tax scams continue to occur at an alarming rate and an increasing number of people fall prey to these scams. Don’t be one of them. If it sounds too good to be true, it probably is.

Some scams are complex, with sophisticated algorithms being used to steal identities. Other scams are as simple as picking up the telephone to trap unaware and unsuspecting taxpayers. Once again and not surprisingly, phishing, phone scams and identity theft are top three on the list, consistent with last year. Over the last week, TAG spotlighted several of the IRS’s Dirty Dozen Tax Scams for 2019. Below is recap of the complete list.

How the 2019 List Compares to the 2018 List

Many of same scams that appeared on the 2018 list also appear on the 2019 list, meaning that these scams consistently and continuously trap unsuspecting victims year after year. Not surprisingly, phishing schemes continue to lead the list, with new variations appearing each year. This year, in a new twist on an ongoing scheme, phishers are targeting personal bank accounts by having tax refunds deposited in victims accounts. After stealing the victim’s personal information and filing for a fraudulent tax refund, they then attempt to reclaim that refund by posing as an IRS representative, collection agency or even a legitimate vendor that the victim has transacted business with previously. Phishing attempts have increased significantly over 12 months, with an estimated 165 million phishing emails issued every day. Also, they are not limited to individual taxpayers. More than 75 percent of all businesses report some type of attack, with the average cost of an attack and remediation averaging $1.6 million for mid-size companies and a whopping $3.7 million annually for large companies.

Phishing is followed, in rapid succession as in 2018, by phone scams and identity theft. Phone scams have cost taxpayers as estimated $75 million in just the last five years alone, and identity theft remains in the top three even though the IRS has established a variety of new safeguards in individual and business tax returns as well as expanding the Form W-2 verification code initiative.

Below are the links to the IRS news releases for each scam, followed by a chart comparing 2018 and 2019 scams. You can also visit the IRS summary of the 2019 Dirty Dozen Tax Scams.

1. Phishing 

The IRS kicked off its annual Dirty Dozen list of tax scams by warning taxpayers, including individuals, businesses and tax professionals, to be alert for a continuing surge of fake emails, text messages, websites and social media attempts to steal personal information.  For more information, see the IRS news release.

2. Phone Scams

The IRS warns taxpayers to be alert to, and vigilant against, tax time phone scams or "vishing" (voice phishing), which are continuing with increasing frequency, where aggressive criminals pose as IRS agents in hopes of stealing money or personal information. For more information, see the IRS news release.

3. Identity Theft

The IRS notifies taxpayers that this scam remains extremely serious. The scam occurs when a stolen Social Security number or Individual Taxpayer Identification Number is used to file a fraudulent tax return to claim a misdirected refund. For more information, see the IRS news release.

4. Inflated Tax Refunds

The IRS cautions taxpayers to be alert to unscrupulous tax return preparers boasting of inflated tax refunds, a common scam tactic during filing season. For more information, see the IRS news release.

5. Falsifying Income and Bogus Documents

The IRS directs taxpayers to avoid schemes involving falsifying income, including the creation of bogus Forms 1099. For more information, see the IRS news release.

6. Tax Return Preparer Fraud

The IRS advises taxpayers to choose tax return preparers carefully. For more information, see the IRS news release.

7. Inflating Deductions and Credits

The IRS alerts taxpayers to avoid falsely inflating deductions or credits on tax returns as part of its 2019 list of the Dirty Dozen tax scams. For more information, see the IRS news release.

8. Scams Involving Disasters and Fake Charities

The IRS encourages taxpayers to be alert to scam groups masquerading as charitable organizations. For more information, see the IRS news release.

9. Improper Claims for Business Credits

The IRS counsels taxpayers to avoid improperly claiming various business tax credits, a common scam used by unscrupulous tax preparers. For more information, see the IRS news release.

10. Failure to Report Offshore Funds

The IRS warns taxpayers to be wary of offshore tax avoidance schemes. For more information, see the IRS news release.

11. Frivolous Tax Arguments

The IRS advises taxpayers to refrain from using frivolous tax arguments to illegally avoid paying taxes. For more information, see the IRS news release.

12. Abusive Tax Shelters

The IRS warns taxpayers to stay away from abusive tax avoidance schemes. For more information, see the IRS news release.

The 2018 vs. 2019 Dirty Dozen Comparison

 

2018

2019

1.

Phishing

Phishing

2.

Phone Scams

Phone Scams

3.

Identity Theft

Identity Theft

4.

Tax Return Preparer Fraud

Inflated Tax Refunds

5.

Fake Charities

Falsifying Income and Bogus Documents

6.

Inflated Refund Claims

Tax Return Preparer Fraud

7.

Excessive Claims for Business Credits

Inflating Deductions and Credits

8.

Falsely Padding deductions

Disasters and Fake Charities

9.

Falsifying Income to Claim Tax Credits

Improper Claims for Business Credits

10.

Frivolous Tax Arguments

Failure to Report Offshore Funds

11.

Abusive Tax Shelters

Frivolous Tax Arguments

12.

Offshore Tax Avoidance

Abusive Tax Shelters

Reminder of seven things the IRS will never do:

  • The IRS will never call you to demand immediate payment.
  • The IRS will never demand a specific method of payment (prepaid debit card, gift card, wire transfer, etc.).
  • The IRS will never call about taxes owed without first having mailed you a bill.
  • The IRS will never demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • The IRS will never ask you for credit or debit card numbers over the phone.
  • The IRS will never threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
  • The IRS will never call you to discuss an unexpected refund.

TAG's Perspective

As we have been cautioning our clients and friends for years now, never respond to an unsolicited email, unsolicited text or unsolicited phone call. That is, if you did not initiate the discussion, whether an email or text or phone call, etc.―Don't proceed. Don’t respond. Just hang up or delete. This simple approach avoids ugly consequences.

For Further Information

If you would like more information about this topic or your own unique situation, please contact Michael A. Gillen or Steven M. Packer. For information about other pertinent tax topics, please visit our publications page.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.