Tax season is around the corner, which means so are tax scams. Every year, without fail, individuals and business owners alike fall victim to tax scams, resulting in the loss of substantial amounts of money and sensitive personal data. The Better Business Bureau reported that taxpayers lost $5.7 billion due to tax scams and fraud in 2022 alone. In today’s blog, you’ll discover the top scams you need to be on the lookout for to reduce your chances of becoming these scammers’ next victim.
The IRS has specific methods of contacting you
To minimize the risk of falling victim to Internal Revenue Service scams is to know how the IRS will contact you. They will not initiate communication with taxpayers through email, text messages or social media platforms for the purpose of soliciting personal or financial information, as outlined on their website. The IRS’s primary mode of communication is physical mail; however, if they’re unable to reach you via mail, they may initiate a phone call. If this situation arises, they will still try not to solicit any personal or financial information over the phone, and they will never threaten you or demand payment. If you have doubts about any communication you receive, you can check out this article to help you figure out if it’s really the IRS contacting you.
Here are the top scams to keep an eye on this tax season
The Refund Scam
The Internal Revenue Service has issued a warning to taxpayers regarding a scam designed to deceive individuals into believing they qualify for a refund. This is often the most common scam that we see year after year.
In this scheme, recipients are sent a formal notification, usually a letter, stating that they have an “unclaimed refund” available. There are variations of this, including one scam that uses a cardboard envelope displaying the IRS logo from what looks to be a certified delivery service.
Like many scams, the fraudulent letter provides contact information and a phone number that is in no way affiliated with the IRS. What sets this scheme apart is its request for various personal details from taxpayers, including detailed images of driver’s licenses. Identity thieves seeking to get their hands on tax refunds and other confidential financial data can exploit such information. Stay vigilant and be cautious of such deceptive communications. If something seems off, it probably is.
Identity Theft
If your personal information falls into the hands of cybercriminals, they can file a fake tax return on your behalf and potentially collect a refund payment. The IRS recently reported that more than one million tax returns were flagged last year for potential identity theft.
To safeguard against tax ID theft, it is advisable to apply for an Identity Protection PIN from the IRS before you file your return. It is also a good idea to file early before criminals have a chance, and if you get a notice about an alleged “duplicate tax return” or a notice saying that additional taxes are owed, contact the IRS directly as soon as possible.
The ERC Scam
The Employee Retention Credit (ERC), also known as the Employee Retention Tax Credit, or ERTC, is a refundable tax credit against certain employment taxes. The IRS and tax professionals continue to see aggressive broadcast advertising, direct mail solicitations, and online promotions involving the ERC. Despite its legitimacy, aggressive promoters are misrepresenting and exaggerating who can qualify for the credit.
This has led the IRS to issue many warnings about ERC schemes from third-party promoters that charge large up-front fees, or a fee based on the amount of the refund. These promoters might neglect to notify taxpayers that they must reduce wage deductions claimed on the business’s federal income tax return by the amount of the credit.
Businesses, tax-exempt organizations and others thinking about applying for the ERC need to carefully review the official requirements for this credit before they claim it.
The “Impact Payment” Scam
As you prepare to gather the necessary paperwork for filing your 2023 return, be aware of a new online scam circulating. This scheme involves an email displaying the IRS logo and addressing the “third round of economic impact payments,” labelling it an “important matter concerning your recent tax return filing.”
The email states that certain inconsistencies or missing information have been identified and assures recipients that a refund of $976 awaits them upon submission of the required document. Notably, there’s a button labeled “complete my information,” however IRS Media Relations Specialist Robert Marvin urges you not to click it.
The “Additional Information Needed” Scam
Exercise caution if you receive an email from the IRS requesting that you submit a tax form. Although taxpayers may be required to complete certain forms, such as the W-9 for freelancers and W-4 forms for employees, it is important to note that these forms are typically directed to companies and do not go directly to the taxpayer from the IRS.
To avoid falling victim to potential scams, it is recommended that you disregard such messages and promptly report the fraud to the IRS. It’s important to emphasize that the IRS does not initiate communication via email, and any solicitation for forms through this is indicative of fraudulent activity.
Another Tax Agency Scam
Scammers often disguise themselves as legitimate or fictitious tax agencies during phone calls. Examples involve impersonating entities like the Taxpayer Advocate Service or the nonexistent Bureau of Tax Enforcement.
While the Taxpayer Advocate Service is a valid organization, it does not initiate unsolicited calls to taxpayers. Conversely, the Bureau of Tax Enforcement is not a genuine organization.
Exercise caution and skepticism toward unsolicited phone calls purporting to be from government agencies. Obtain a reference number if available, end the call and initiate a return call using an officially verified phone number. This practice helps in safeguarding against potential scams.
Be Smart And Protect Yourself
Scams tend to surge during tax season but, with some vigilance, identifying an IRS imposter and protecting your finances and sensitive data becomes possible.
To enhance protection and minimize the risk of identity theft, it is recommended that you file your taxes early. Early filing reduces the window for scammers to impersonate you. When hiring a tax preparer, vet them thoroughly and be wary of those promising substantial refunds without prior access to your information. For an added layer of security and peace of mind, consider utilizing a fraud protection service.
Cybercriminals are always active. Tax fraud is just a single method employed by individuals trying to steal your information and money. It’s important to have a full cybersecurity system in place to make sure your organization is protected at every entry point. We recommend a FREE third-party security assessment. Our team of professionals will examine your entire network for vulnerabilities and help you map out a plan to fix them. Throughout our many years of experience, we’ve always found something.
To schedule your no-obligation assessment for your peace of mind, click here.
