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July 20, 2022

IRS “Dirty Dozen” Part 2: Pandemic-Related Scams to Avoid in 2022

In June, we broke down the first four “Dirty Dozen” scams addressed by the Internal Revenue Service (IRS) to prevent taxpayers from falling susceptible to potentially abusive arrangements. In this article, we’ll share perspective on “Dirty Dozen” related to the COVID-19 pandemic.

Playing on the fear and uncertainty many taxpayers have felt over the past few years in the wake of the pandemic, scammers are working aim to steal sensitive personal information from taxpayers like you. In the following we’ll discuss specific scams to be aware of, including false stimulus payments, fraudulent unemployment claims, fake offers of employment via social media, and bogus charitable donations.

Tips for taxpayers on emerging scams

To avoid compromising yourself with these “too good to be true” schemes, taxpayers should stay wary, as these scams adopt a wide range of communication methods, including:

  • Emails
  • Phone calls
  • Social media posts
  • Targeted online advertisements

You must also consider each source before putting any of these arrangements on your tax returns — because ultimately, you are the one responsible for what is on the return, not the promoter who reached out to you and made a promise they failed to uphold. To mitigate risk, an anxious taxpayer should turn to trustworthy tax professionals to assist with their returns.

Read on to learn which scams fall under this Dirty Dozen category.

Economic Impact Payment and Tax Refund Scams

This scam involves identity thieves who use text messages, phone calls, or emails to ask individuals to click a link, verify a date, or provide bank account information to access Economic Impact Payments (EIPs), or stimulus payments.

Reminiscent of tax refund scams, you should act defensively by ignoring these calls and deleting suspicious emails or texts without opening them — the IRS will never contact an individual by phone, email, text, or social media to acquire sensitive information.

Mailbox theft is another worry associated with this scam, so we encourage you to exercise vigilance and the report suspected mail loss to postal inspectors.

Unemployment Fraud (and, subsequently, inaccurate taxpayer 1099-Gs)

As many people lost their jobs and unemployment rates rose during the pandemic, many taxpayers applied for and received unemployment compensation to stay afloat. But they were not the only ones who applied; defrauders went to work stealing the personal information of those who had not applied and proceeded to file unemployment compensation claims for themselves to ultimately steal the payments.

If this happened, you may receive Form 1099-G to report unreceived unemployment compensation. Then request a corrected form to file compliantly, stating only the unemployment compensation and income you did receive.

Fake Employment Offers Via Social Media

In a similar vein, scams continue to capitalize on those who faced unemployment throughout the pandemic by littering social media with fake job postings to entice out-of-work job seekers to provide their personal information. This can then be used to steal your identify or file a fraudulent tax return, so the scammer ends up with your tax refund.

Fake Charities Created to Steal Your Money

While fake charities aren’t exactly new to the scammer scene, the threat has grown throughout the pandemic. Because taxpayers can claim a deduction on their federal tax returns by donating money or goods to a qualified charity, giving back can be enticing. But taxpayers should always verify the charity in which they are donating to — note the exact name, web address, and mailing address, and confirm it is a legitimate organization and not a knock-off meant to confuse.

The IRS also recommends using this search tool to ensure a charity’s validity. Remember, a charity should never pressure an individual to donate right away, and do not donate using a gift card or money wire — only credit card or check, and only after you have performed your due diligence in verifying the charity’s legitimacy.

Consequences of falling for a Dirty Dozen scheme

It is important for taxpayers who have already taken part in transactions like these — or those who are thinking about doing so — to consult tax professionals before claiming any tax benefits they think they are owed.

Those taxpayers who have already claimed the purported tax benefits of one of these four “Dirty Dozen” arrangements on a tax return should file an amended return and go to an independent professional for guidance. If necessary, the IRS will examine the tax benefits from transactions like the ones depicted in the list and inflict penalties related to accuracy ranging from 20% to 40%, or a civil fraud penalty of 75% on any taxpayer who underpaid.

Our perspective on the latest batch of “Dirty Dozen” scams

This is not, of course, an exhaustive list of every scam the IRS has its eye on this year. But it does include some of the more common trends. The best advice we can give? If something looks too good to be true… it probably is. Consult your tax professional for guidance and know that it is in your best interest to stay aware of these nefarious arrangements, so you do not fall susceptible to additional penalties.

Stay tuned for more deep dives into the IRS’s Dirty Dozen list.

MGO’s Tax team brings over 30 years of experience and is well versed in ensuring your tax returns are compliant. We also stay up to date on the risks, pitfalls, and warnings issued by the IRS so you don’t have to. If you think you have been involved in or are in the process of being involved in one of the Dirty Dozen scams, we can help. Contact us today.