IRS 2023 Dirty Dozen – Don’t Be a Scam Victim

The IRS continually reminds taxpayers to be vigilant about not sharing their personal information with potential scammers.  Here is a list of the top scams for 2023 reminding taxpayers that the scams can continue even after tax season is over.

1. Employee Retention Credit Claims

There are numerous companies soliciting anyone and everyone to encourage them to take advantage of the ERC, which is a tax credit designed to help employers who were impacted by COVID.  Many of these ERC companies are unscrupulous, and they entice companies to claim tax credits for which they really were not eligible.  The IRS is beginning to audit the claims.  If you think your business may be eligible, please contact a reputable firm to do the proper calculations.  This way, you will have adequate backup if your claim is audited.  And remember, this is a tax credit for employers.  Individuals are not eligible!

2. Phishing and Smishing

Fraudsters can make some surprisingly official looking fake emails and texts.  The IRS never initiates contact with taxpayers by email, text, or social media.  All contact will begin with a letter or notice arriving in the regular mail.  Don’t click on links in these electronic communications and never share any personal information.

3. Online Account Help

I encourage my clients to set up an online account with IRS.gov.  This is a great way for them to make electronic payments and see the status of their account, estimated payments, refunds, etc.  There are crooks, however, that will offer to help create this account for you so that you will have to give them your personal information.  You should do it yourself!

4. False Fuel Tax Credit Claims

Businesses that have off-highway or farming vehicles can take a fuel tax credit.  The IRS has seen an increase in people promoting the filing of these refundable credits, even though this is not available to most taxpayers.

5. Fake Charities

Don’t be lured in by fake charities.  Make sure you are donating to legitimate charities that will use your money for the correct cause.  Currently, a tax deduction for charitable donations is only available to taxpayers who itemize their deductions.

6. Unscrupulous Tax Return Preparers

Beware of tax preparers who base their fee on the amount of your refund or who refuse to sign the return as the paid preparer.  Another warning sign would be if the preparer suggests that you have more deductions than your records reflect.  These might be clues that the returns will be altered to claim false credits or refunds.

7. Social Media: Fraudulent Form Filing and Bad Advice

There are many knowledgeable tax professionals that post useful information on social media.  There are also many other people who either have incorrect understanding of the tax law or are willing to suggest scams in blatant disregard for the law.  Be careful whose advice you heed and verify any spectacular “loopholes” by researching the tax law or consulting a tax professional before filing anything.

8. Spearphishing and Cybersecurity for Tax Professionals

Accountants and CPAs can also be targets of scammers.  Ask you tax professional about their data security procedures since they have access to some of your most sensitive data.  Be sure to submit your data and tax documents to them in a secure way.  Although many tax forms now truncate your social security number, emailing tax documents to your CPA is not a good idea.

9. Offer in Compromise Mills

There are lots of ads on the radio and tv about companies that can help you get out of tax debt for pennies on the dollar.  These mills may mislead taxpayers about who is eligible for the various relief programs the IRS has for taxpayers unable to pay their tax in full by the due date.  Use the tools on IRS.gov to see if you qualify before entrusting your data to a third party.

10. Schemes Aimed at High-Income Filers

Scammers may target high-income taxpayers with more sophisticated schemes involving things like trusts or installments sales.  Be sure you consult with your attorney and CPA before setting up new entities or trusts for tax avoidance motives.

11. Bogus Tax Avoidance Strategies

If you are pitched an idea to avoid taxes by someone suggesting an unusual form of business or idea, beware!  Popular subjects are micro-captive insurance arrangements or syndicated conservation easements.  Tax provisions related to these types of situations must be analyzed very carefully and should only be used by taxpayers with knowledgeable and professional advisors.

12. Schemes with International Elements

The IRS and the Department of the Treasury are very concerned with taxpayers hiding assets, and the income produced by such assets, in countries outside the United States.  Many U.S. taxpayers have legitimate business and investment interests in foreign countries, and there are rules for how to report these.  Be skeptical of anyone who suggests moving money or investing money offshore to save tax.

Remember the adage, “if something sounds too good to be true, it probably is” and treat all unsolicited tax advice with skepticism.  If you know about an abusive tax scheme or tax return preparer, you can report them to the IRS on Form 14242.