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August 16, 2022

IRS “Dirty Dozen” Part 3: Consumer-Targeted Scams to Avoid in 2022

We broke down the first four “Dirty Dozen” scams and the fifth pandemic-related Dirty Dozen scam addressed by the Internal Revenue Service (IRS) to prevent taxpayers from falling susceptible to potentially abusive arrangements. In this article, we share perspective on “Dirty Dozen” scams related to consumer-targeted fraud, including Offer in Compromise “mills;” suspicious communications in all forms including text, email, and phone calls; and spear phishing attacks aimed at stealing consumer identities.

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 are next on the Dirty Dozen list.

Scam #6: Offer in Compromise “Mills”

This scam, known as an Offer in Consequence (OIC) mill, targets taxpayers who struggle to pay their taxes and may face debt as a consequence for their delinquency or noncompliance. It is commonly seen right after the filing season concludes as these taxpayers stress about what they might owe. What is the OIC? It is an agreement between you and the IRS that resolves your tax debt, and these mills claim to be able to settle your tax debt on the cheap. But the reality is, only the IRS has the authority to settle or compromise your federal tax liabilities, and it is based on certain circumstances. Utilizing local advertising, the mills boast they can get you a great deal, even if they know you do not actually qualify — and if they do get you a “deal,” it is the same deal you would have received if you had worked directly with the IRS (and if you had gone to the IRS first, you would not have paid potentially thousands in fees to these fraudsters).

Before you trust an OIC mill or invest your time in submitting an offer yourself, check out the IRS’s Offer in Compromise Pre-Qualifier Tool to determine your eligibility. The site also has a host of resources to utilize when it comes to tackling these offers — the right way.

Other dishonest tax preparation tactics include:

  • Ghost preparers who do not sign the tax returns they prepare for you,
  • Inflated refund promises, and
  • Preparers who:
    • Only take cash,
    • Do not provide you with a receipt,
    • Fabricate income so you qualify for certain tax credits,
    • Direct your refunds into their accounts, or
    • Claim fake deductions so the refund is bigger (which they, in turn, get a cut of).

Scam #7: Suspicious communications in all forms, including text, email, and by phone

These scams strive to make you feel fearful or surprised so scammers can trick you into divulging your personal information, which they can then steal to file fake tax returns and access financial accounts. Whether it entails a phone call, a text message, or an email, these methods have been around for years, and it is no question why they are still in circulation today: they work. And while they evolve and change depending on what is going on in the country (many currently reference stimulus checks or the COVID-19 pandemic), these are the basic methods.

Text message scams:

sent to smartphones and sometimes include website links that can seem reputable — but they are not. Remember, the IRS will not send you text messages regarding personal tax issues, and they definitely do not reach out via social media. If you receive a text that claims to be from the IRS, you can report it by taking a screenshot of the message and emailing it to phishing@irs.gov along with the date, time, and time zone you received it and your phone number. And, it may go without saying, but we are going to say it anyway: do not open the attachments or links in these messages!

Email scams:

work similarly to text message scams, but they appear in your inbox instead of your messages. Just like texts, the IRS will not contact you by email to request personal information — they use regular mail. You can report suspicious emails to the IRS at the email address above.

Phone scams:

have several different pre-recorded voicemail scripts, but nearly all are threatening and include language meant to scare you into answering with your personal information. Threats include issuing a warrant for your arrest if you ignore them, getting deported, or revoking your license. Be wary of any and all phone numbers you do not recognize; these scammers can fake caller ID numbers, so you are unable to check who is calling.

Here are some things the IRS will not do over the phone:

  • Ask for your credit or debit card information,
  • Make “right now” demands for you to pay what you owe,
  • Threaten to call the authorities if you do not pay, and
  • Demand you pay immediately using methods like a gift card or wire transfer.

Scam #8: Spear phishing attacks to steal identities

Spear phishing deploys an email scam aimed at stealing a professional firm’s software credentials so the scammers can steal data and identities to file tax returns for refunds, which they will then pocket. The most recent phishing email convincingly utilizes the IRS logo with a subject line telling you action is required because your account has been put on hold. If you click on the link within the body of the email, malware could be downloaded to your computer, or you will be directed to a site with popular tax software preparation providers’ logos. Once you select a logo, you will be asked to input your credentials (which will be stolen and most likely used to file fraudulent tax returns).

The IRS labels spear phishing as a very serious problem because it can be “tailored to attack and steal the computer system credentials of any small business with a client data base,” including tax professionals’ firms. Their suggestion? Never let your guard down when it comes to your cybersecurity. Any client-based enterprise can be targeted.

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.

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.

And remember: if you owe taxes, the IRS will almost always mail you a bill first! MGO’s Tax team brings more than 30 years of experience and is well versed in reviewing your return for compliance. 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.

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