Search
  • Dr. Mark Lee Levine, Professor

Dirty Dozen Tax Scams

For many years, the Internal Revenue Service (IRS) has been issuing its target list of the “top” tax scams it has examined over the last year.

On July 16, 2020, the IRS issued its IR 2020-160. This IRS Release detailed the newest edition to its continuing, yearly array of tax swindles.

The following includes an examination of this Dirty Dozen list issued in 2020 by the IRS.

Phishing:

This phishing fraud is generated by the evil-doer/scam artist sending out emails to entice the recipient to act on the email. These fake emails are designed to allow the sender to garner information from the receiver/victim. Such emails often seek financial information and/or information that allows the crook to gain financial information and in turn, with such facts, to gain access to accounts or other sources where monies or property can be stolen by the scammer.


(Scams involving this virus are discussed below.)


Fake Charities:

The earlier mentioned phishing schemes and charity crimes are not new on the list of the IRS Dirty Dozen.


The approaches vary as to how the crooks try to connect with taxpayers and various charities. However, one approach often employed is to identify with disasters that are mentioned in the news; the fraudster uses the disaster and solicits contributions for relief. Those contributions often end in the pockets of the thieves; the funds do not advance to a bona fide charity.

Phone Calls from the IRS and Threats from the IRS:

Often the crooks call taxpayers and employees at firms and assert they are from the IRS. Such scammer/caller often states to the proposed victim that taxes are owing by the victim to the IRS. The caller then makes threats as to collection, criminal actions, and other retaliation steps that might be taken by the IRS against the taxpayer or a given company, should the “back taxes” not be paid.

Social Media Scams:

The use of social media today is very common. Almost every young adult and upwards in age in the US uses social media to communicate on a regular basis.


Such frauds, using this Social media medium, often involve, said the IRS, contact with and use of names involving family, friends and co-workers. Hand-in-hand with these tools, identity theft is often also involved. (See below.)


Once the scammer obtains personal information, the data is often employed to commit other crimes, such as stealing from family accounts.


EIP or Refund Theft:

This Refund type scam is not new in toto on the IRS Dirty Dozen list. Rather, this theft partakes of some of the prior Dirty Dozen scam approaches, but it also added a new wrinkle or area for scams. That is, the theft of stealing refund claims, such as tax refund claims generated by tax credits, is not new. Stealing tax refund claims from taxpayers that have overpaid on their taxes is not new. What has been added as an additional area of theft in this scam is stealing economic impact payments that have been provided under the law more recently as a result of the payments being made to individuals that qualify under the recent acts passed in connection with COVID 19.


Senior Fraud:

In an area very much often related to some of the schemes noted above, especially for tax refunds, there are the crimes undertaken by scammers involving victims that are seniors. Such individuals are often more vulnerable to such criminal acts.


The use of the earlier noted scam of impersonating an IRS official, coupled with acting against a senior, is quite common, warranting the IRS to place this type of fraud in the top Dirty Dozen scams.


Scams targeting non-English speakers:

Taking advantage of those individuals that do not speak English or do not speak it well is a common part of many of these Dirty Dozen scams. This approach, to “trick” individuals to pay over their economic impact payments, tax refunds, etc., is a common tactic employed against those who do not speak or understand English very well.

Unscrupulous Return Preparers:

Because all taxpayers that owe federal taxes, among others, must normally prepare tax returns to report their income, claim deductions, etc., this area of return preparation is ripe for those committing fraud against unsuspecting taxpayers.


It does not take much for an “on-line,” web, tax return preparer, for example, to extract information—confidential information—from taxpayers seeking to have help in preparing their tax returns.

Offer in Compromise Mills:

Aside from the more recent scams attempting to gain payments owing to individuals under the CARES Act, as discussed above, the other scams, noted above, are not new. Such scams continue to be a problem that the IRS addresses on a yearly basis, when looking to the Dirty Dozen in scams. However, the scam dealing with Offers in Compromise (OIC), noted under this discussion of scams, has gained more attention by the IRS in this last year; hence, it is included in the Dirty Dozen list for the year.

The IRS cautions that prior to agreeing (and paying) to have someone work for the taxpayer to deal with the IRS in these OIC Programs, the taxpayer should contact the IRS and be certain that their case is the type that might fit within the IRS OIC.

Fake Payments with Repayment Demands:

The essence of this scam is to trick the taxpayer into thinking the taxpayer has been paid a refund. Then, the scammer, impersonating as an IRS agent, calls the taxpayer to say that there was a mistake by the IRS as to the payment to the taxpayer; and, the taxpayer needs to refund the over payment made to the taxpayer.

Payroll and HR Scams:

The IRS noted that in this area of scams, two of the more common areas are those rip-offs dealing with gift cards and those dealing with direct deposits to a bank account.


Often the fraudster tries to have the organization change the direct deposit or other ties where the victim is working. The intent is to have the funds that are due to the employee/victim be paid to the scammer.

Ransomware:

This latter fraud has not been as nearly as important a scam in prior years. However, it has gained ground and is now part of the Dirty Dozen scams listed by the IRS in this latest update.


This sting involves malware/software that infects a computer and allows the criminal to extort funds from the victim, to prevent the swindler from destroying or blocking access by the victim to all or part of the data on the computer owned by the victim.

This type of swindle is of concern in all settings, not limited to only tax issues and the IRS. The fact that the IRS is concerned with these types of scams in tax settings is important. However, many businesses have faced this ransomware crime in settings that have had nothing to do with tax issues.

Conclusion:

The above discussion is only a small taste of the many frauds that are used against individuals and companies in the USA. Some of these involve tax issues. Many involve other areas of concern for businesses and individuals. All have the same motive: extract funds from innocent victims.

Everyone must be on guard against these type of white-collar scam crimes.


By

Dr. Mark Lee Levine,

Professor, University of Denver

15 views0 comments