How to Avoid IRS Tax Scams: Stay Informed, Stay Secure

Staying One Step Ahead: The IRS Unveils The Dirty Dozen

Every year, the IRS unveils "The Dirty Dozen" online – a compilation of the most egregious tax scams. This valuable resource serves as a beacon to keep taxpayers informed and vigilant. You empower yourself to recognize and thwart potential threats by staying updated on the latest scams. Knowledge is your best defense against those seeking to compromise your financial security.

Let's break down the IRS 2023 Dirty Dozen key points:

 1. Employee Retention Credit Claims: Be Wary of Overpromises

Beware of scammers promoting hefty refunds tied to the Employee Retention Credit (ERC). Bad actors entice ineligible individuals to claim the credit, often through misleading radio and internet ads. Stay cautious, as falling prey to these schemes may lead to identity theft.

2. Phishing and Smishing: Guard Against Fake Communications

Stay alert to fake communications posing as legitimate entities, including the IRS and state agencies. Phishing (via email) and smishing (via text) aim to extract personal and financial information. Remember, the IRS primarily communicates through regular mail, not via email or text.

3. Online Account Assistance Scams: Protect Your Personal Information

Be wary of third parties offering unnecessary help in creating an IRS Online Account. Creating an IRS account is straightforward. Seeking unnecessary assistance may put your personal information at risk. Establish your online account directly through IRS.gov.

4. False Fuel Tax Credit Claims: Know the Eligibility Criteria

The fuel tax credit is designed for specific business and farming uses. Unscrupulous actors may encourage taxpayers to claim the credit erroneously. Be cautious and ensure your claims align with the intended purpose of the credit.

5. Fake Charities: Verify Before Donating

In times of crisis, beware of bogus charities seeking to exploit generosity. Verify the legitimacy of charitable organizations to prevent falling victim to scams. Remember, legitimate donations are deductible only when made to qualified tax-exempt entities recognized by the IRS.

6. Unscrupulous Tax Return Preparers: Watch for Red Flags

While most tax preparers are trustworthy, be cautious of those charging fees based on refund size. Steer clear of "ghost" preparers who refuse to sign or provide their IRS Preparer Tax Identification Number (PTIN). Your tax preparer's transparency is crucial.

7. Social Media Misinformation: Exercise Caution

Misleading tax information circulates on social media. Be skeptical of advice related to standard tax documents like Form W-2 or obscure ones like Form 8944. If something seems too good to be true, exercise caution and verify information from reputable sources.

8. Spearphishing and Cybersecurity: Protect Client Data

Tax professionals must remain vigilant against spearphishing, tailored attempts to breach specific organizations. The IRS highlights the potential harm of data breaches, emphasizing the importance of safeguarding client data.

9. Offer in Compromise Mills: Exercise Caution

While Offers in Compromise provide relief for federal tax debts, be cautious of aggressive promotion by "mills." These entities may mislead individuals who don't meet qualifications, resulting in unnecessary expenses. Utilize the IRS Offer in Compromise Pre-Qualifier tool to assess eligibility.

10. Schemes Aimed at High-Income Filers: Know the Risks

Understand the risks associated with schemes like Charitable Remainder Annuity Trust (CRAT) and Monetized Installment Sales. Exercise caution when engaging in potentially abusive transactions, as they may not align with legitimate tax strategies.

11. Bogus Tax Avoidance Strategies: Avoid Micro-Captive Insurance Abuses

Steer clear of abusive micro-captive insurance arrangements that lack the attributes of legitimate insurance. Similarly, be cautious of syndicated conservation easements that may result in grossly inflated tax deductions.

12. Schemes with International Elements: Stay Informed

The IRS continues to scrutinize offshore accounts and digital assets. Ensure compliance with tax regulations, as assertions of assets being out of reach are inaccurate. Be cautious of international arrangements, such as Maltese individual retirement arrangements, which may exploit tax treaties improperly.

Get the IRS Dirty Dozen full details here.