Beware of Tax Scams

Important Reminder: Beware of Tax Scams – Especially during Tax Filing Season

The Internal Revenue Service recently shared Tax Tip 2022-15 to remind taxpayers to stay vigilant as a new tax season entices fraudulent actors to develop scams.

Here are a few tax-related scams the IRS is aware of - and what you can do to avoid them or act if you are a victim of one.

Phone scams warning in the IRS Tax Tip
Con artists will try to impersonate IRS agents over the phone to steal taxpayers’ money or their personal information. In the past, scammers made fake calls claiming to represent the Taxpayer Advocate Service, or threatened to cancel the victim’s Social Security number for an unpaid tax bill. On most occasions, the IRS will initiate contact with taxpayers through letters (aka notices) mailed by the United States Postal Service.

The IRS will NEVER:

• Insist on immediate payment through phone call. Payment may be via prepaid debit cards, gift cards or wire transfer.
• Threaten to have you arrested by local police or law enforcement for not paying.
• Refuse to give the taxpayer a chance to question or appeal the amount owed but demand the taxes to be paid.
• Call about a tax refund without notice.

The IRS recommends that if you receive one of these calls to:

• Record the number and then hang up the phone immediately.
• Report the call to TIGTA using their IRS Impersonation Scam Reporting form or by calling 800-366-4484.
• Report the number to phishing@irs.gov and put "IRS Phone Scam" in the subject line.

Charity Fraud
Scammers will seek donations for fake non-profit organizations though the use of emails, social media, phone calls, or other methods. These types of scams are more prevalent following a major natural disaster, such as Hurricane Ida in 2021, and try to take advantage of an individual’s generosity.

The IRS’ recommendations to avoid falling for a charity fraud include:

• Find or verify a non-profit organization through the IRS’ Tax Exempt Organization Search.
• Make contributions by check or credit card to have a record the donation.
• Do not give out personal information such as social security number or passwords to organizations soliciting a contribution.

Offer in Compromise (OIC) Mills
An Offer in Compromise (OIC) agreement is a legitimate IRS program offered to taxpayers who would like to settle their debt by filling an application to reduce their tax liability. However, the program is very strict in considering the taxpayer’s unique situation or circumstances - and only a small percentage of applications are approved. Taxpayers should be aware of promoters (aka OIC mills) who advise individuals that their services are needed to settle their debt for “pennies on the dollar.”

One way OIC mills entice individuals to cooperate is by misleading them into thinking that there is a limited time to resolve their debt with the program. These scams usually result in the taxpayer owing the original tax liability and the excessive fees charged by the promoters.

The IRS reminds taxpayers to avoid OIC mills by:

• Remaining skeptical of TV or radio advertisements that make erroneous claims of large settlements.
• Review eligibility requirements of the program with the Offer in Compromise Pre-Qualifier Tool.

Ghost Tax Preparers
A valid Preparer Tax Identification Number (PTIN) is required by law for individuals who are paid to prepare or assist in preparing federal tax returns. The paid preparer must then include their PTIN and signature on the return.

A “ghost preparer” is an individual who does not (or refuses to) sign in print or electronically the tax returns they prepare. By not signing a tax return, the ghost preparer may be seeking to make a quick profit or charge fees based on the expected refund amount. A ghost preparer may also falsely report income to qualify for tax credits, claim fake deductions or have the taxpayer’s qualified refunds direct deposited into their account.

Actions that a taxpayer can take to protect themselves include:

• Verify the credentials and qualifications of their tax preparer with the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
• Before personally signing, a taxpayer should review their tax return and ask questions if something is unclear.
• Verify banking information if a refund is being direct deposited.
• Report a preparer’s misconduct with an IRS Form 14157, Complaint: Tax Return Preparer.
• If it is suspected a return is being filed or changed without a taxpayer’s consent, the taxpayer should file a Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.

Final thoughts
The IRS is quite diligent in advising the public about the ever-growing number and type of tax scams used by con artists to take advantage of innocent taxpayers.

Unfortunately, these efforts by the IRS are only effective if the taxpaying public heightens its awareness of how to ideally avoid, and later, mitigate the impact of tax scams.

If you have questions, please contact us at info@herbein.com. 

Article prepared by Emily Seaman-Brennan.