It's Dirty Dozen Week at the Internal Revenue Service.
That's right, a week of examining the 12 most common and/or worst tax scams that have cropped up over the last year. I've been blogging about the annual IRS scam list for as long as Don't Mess With Taxes has been around.
Sadly, some of the scams that I noted in my first list post back in the spring of 2006 — phishing for taxpayer identity details, fake charities, unscrupulous tax preparers — tend to show up year after year. You can see the repeat offenders in the 2019 and 2020 lists.
Now and then a new scheme appears.
Then 2020 rolled in, bringing with it the COVID-19 pandemic.
Most of us adjusted our lives to cope with coronavirus. Tax crooks did the same, tweaking old scams and coming up with new ones to take into account pandemic-related tax law changes.
Those tax-connected attempts to steal our identities, money or both kick off this week's first installment of the 2021 Dirty Dozen Tax Scams. Yes, installments.
The IRS is taking a different approach this year in issuing its annual warning about the 12 worst tax-related scams. Instead of delivering them all at once, it's doing so based on four categories.
Today's scams are pandemic-related. Here goes.
Economic Impact Payment (EIP) theft: As more people lost jobs due to COVID-19 business closures and other health safety protocols, a series of financial relief laws were enacted. The amounts varied, but the concept was the same. Uncle Sam instructed the IRS to issue Economic Impact Payments (EIPs), also known as stimulus payments, to taxpayers.
Most of them went out — and some still are being delivered — to qualifying individuals whose information already was in the agency's system.
Crooks, however, have tried — and are still trying — to take advantage of the IRS' automatic COVID relief distribution system. EIP theft techniques include:
- Beware unsolicited and unexpected tax-related contacts. Text messages, random incoming phone calls, or emails inquiring about bank account information or requesting recipients to click a link or verify data should be considered suspicious and deleted without opening.
Again, the IRS is automatically distributing EIPs. It will do the same starting next month with the new Advance Child Tax Credit (AdvCTC), which was part of the latest COVID relief law, to taxpayers who are eligible based on the information the IRS has on them from prior filings.
In the case of the AdvCTC, if you aren't in the IRS database because you haven't had to file a return recently, the IRS is asking you to use its online non-filers registration tool to get your information directly to the agency.
- Don't fall for stimulus check scams. While the IRS did recently mail letters via the U.S. Postal Service to potential recipients of the AdvCTC, those communications were to let people know they were in the system.
As far as EIPs, the IRS won't initiate contact by phone, email, text, or social media asking for Social Security numbers or other personal or financial information related those and other COVID-related assistance being distributed by the agency.
If you get such a communication from someone purporting to be with the IRS or another group that can, in their words, help you get or get more of an EIP or other coronavirus relief, it's a scam. You don't need any intermediary beyond a trusted tax professional in dealing with the IRS.
- Be alert to mailbox theft. The IRS is distributing COVID-related financial assistance as direct deposits to taxpayers' bank accounts when possible. However, some people still rely on getting the payments as mailed paper U.S. Treasury checks. If that's you, frequently check your snail mail box and report suspected mail losses to Postal Inspectors.
If you have any questions about an unusual or unexpected contact regarding COVID relief, talk to your tax adviser. The IRS also has a special web page with the latest on coronavirus tax relief.
Unemployment benefits fraud: The financial relief being distributed by the IRS isn't the only pandemic assistance available. Millions of taxpayers lost their jobs and received unemployment compensation from their state.
However, scammers also took advantage of this relief option by filing fraudulent claims for unemployment compensation using stolen personal information of individuals who had not filed claims. Payments made on these fraudulent claims went to the identity thieves.
The first indication that they were unemployment fraud victims came when taxpayers got a Form 1099-G. This document reports to the individual and the IRS the amount of unemployment compensation that they got. Or in this scheme's case, didn't get.
If this happened (or happens) to you, the IRS urges you to contact your appropriate state agency for a corrected form. If a corrected form cannot be obtained in time to meet your tax filing deadline, the IRS says to complete your return claiming only the unemployment compensation and other income you actually received.
You can read more on how to handle unemployment insurance fraud in my post Labor Department joins IRS in offering online resources for unemployment fraud victims. The IRS also advice at its Identity Theft and Unemployment Benefits page. You also should check DOL.gov/fraud for state-by-state reporting information.
Just the scam beginning: As noted earlier, the IRS this year is taking a different approach in issuing its annual warning about the 12 worst scams. Instead of delivering them all at once, doing so based on four categories.
Following today's discussion of Pandemic-related Tax Scams, the IRS (and the ol' blog) will look at these con artist categories, which will have links to the posts when they are published:
- Personal information cons, such as phishing, its cousin voice phishing or vishing, and ransomware, on Tuesday, June 29;
- Ruses that focus on unsuspecting victims, including fake charities and fraudulent schemes targeting senior citizens or immigrants, on Wednesday, June 30; and
- Questionable arrangements that promote abusive structures, such as syndicated conservation easements, on Thursday, July 1.
I hear you. That's just four days, not a full five-day work week. Don't worry. I'll wrap up things here with a consolidated look on Friday, July 2, of the 2021 Dirty Dozen Tax Scams and tips on how not to fall for any of them.
You also might find these items of interest:
- Young people are increasingly scam victims
- Free File can help those who don't usually file taxes get COVID payments and more
- IRS hosting tax return filing events to help families get Advance Child Tax Credit payments