Top 10 Tax Scams to Watch Out for in 2023-2024
Tax scams constantly threaten taxpayers, especially during the filing season. Therefore, with the upcoming 2024 tax season, knowing these scams can help you identify them and take necessary action if you are ever targeted.
Scammers use various methods to trick people into giving up their personal or financial information, paying fake taxes or fees, or participating in abusive tax schemes. The IRS publishes a list of the most common tax scams yearly, known as the “Dirty Dozen“. Here are the top 10 tax scams to watch out for in 2023-2024, based on the latest IRS announcements.
1. Economic Impact Payment theft
Scammers try to steal the stimulus payments that eligible taxpayers receive from the IRS. They may use phishing emails, phone calls, text messages, or social media to ask for bank account information or personal identification numbers. They may also use fake websites or apps that look like the IRS website or the Get My Payment tool. The IRS does not initiate contact with taxpayers by email, phone, text, or social media to request personal or financial information related to the payments. Taxpayers should only use the official IRS website or the Get My Payment tool to check their payment status or update their information.
2. Unemployment fraud
Scammers file fraudulent claims for unemployment benefits using stolen identities of individuals who have not filed claims. The victims may receive a Form 1099-G from their state unemployment agency, reporting income that they did not receive. This could affect their tax liability and eligibility for certain tax credits and deductions. Taxpayers who receive an incorrect Form 1099-G should contact the issuing state agency and request a revised form. They should also report identity theft to the IRS using Form 14039 and to the Federal Trade Commission using IdentityTheft.gov.
3. Fake charities
Scammers pose as legitimate charitable organizations and solicit donations from unsuspecting donors. They may use names that sound similar to real charities or create fake websites or social media accounts that mimic them. They may also use phone calls, emails, text messages, or in-person visits to ask for donations, often in cash or gift cards. They may also offer false tax receipts or claim that donations are tax-deductible when they are not. Taxpayers who want to make charitable contributions should check the IRS Tax Exempt Organization Search tool to verify the status and deductibility of their donations.
4. Senior/immigrant fraud
Scammers target seniors and immigrants who may be more vulnerable or less familiar with the tax system. They may use phone calls, emails, text messages, or letters to threaten them with arrest, deportation, or other penalties if they do not pay a fake tax debt or fee. They may also ask for personal or financial information, such as Social Security numbers, bank account numbers, or credit card numbers. The IRS does not make threats or demand immediate payment by phone, email, text, or letter. Taxpayers who receive such communications should hang up, delete, or ignore them.
5. Offer in Compromise mills
Scammers offer to settle tax debts for pennies on the dollar through an Offer in Compromise (OIC), which is an agreement between a taxpayer and the IRS that resolves a tax liability for less than the full amount owed. However, not everyone qualifies for an OIC, and the process can be complex and lengthy. Scammers charge high fees and make false promises to taxpayers who may not be eligible for an OIC or who could resolve their tax issues without one. Taxpayers who are interested in an OIC should use the IRS OIC Pre-Qualifier tool to check their eligibility and consult a reputable tax professional if they need assistance.
6. Syndicated conservation easements
Scammers promote abusive tax schemes involving syndicated conservation easements, which are arrangements where multiple investors buy interests in a property and donate a conservation easement to a land trust or charity, claiming inflated tax deductions based on an overvalued appraisal of the property. The IRS considers these schemes as listed transactions that must be disclosed on tax returns and subject to penalties and audits. Taxpayers who participate in these schemes may face significant tax consequences and legal challenges.
7. Fuel tax credit scams
Scammers claim false fuel tax credits on their tax returns, which are generally available only to farmers and off-highway business users of fuel. The credit is not available to most taxpayers, but scammers try to take advantage of its complexity and confusion. The IRS has increased its scrutiny of fuel tax credit claims and will deny any claims that are not supported by proper documentation and eligibility.
8. Phishing
Scammers use fake emails or websites that look like they come from the IRS or other legitimate organizations to lure taxpayers into providing personal or financial information that can be used for identity theft or fraud. The IRS does not initiate contact with taxpayers by email to request personal or financial information. Taxpayers who receive suspicious emails should not click on any links or attachments and should forward them to phishing@irs.gov.
9. Ransomware
Scammers use malicious software that encrypts the victim’s data and demands a ransom for its release. The ransomware may infect the victim’s computer or device through phishing emails, infected attachments, or compromised websites. The ransomware may also spread to other devices or networks that are connected to the victim’s system. The IRS advises taxpayers and tax professionals to use strong passwords, antivirus software, firewalls, and backup systems to protect their data from ransomware attacks.
10. Social media scams
Scammers use social media platforms to obtain personal or financial information from taxpayers or tax professionals or to impersonate them and access their accounts. They may also use social media to promote false tax advice, such as claiming refunds or credits that are not available or applicable. Taxpayers and tax professionals should be careful about what they share on social media and who they interact with online. They should also review their privacy and security settings and report any suspicious activity to the social media platform and the IRS.
Conclusion
These are the top 10 tax scams to watch out for in 2023-2024, according to the IRS. Taxpayers and tax professionals should be vigilant and cautious when dealing with any tax-related communications or transactions. They should also report any suspicious or fraudulent activity to the IRS and other authorities. By being aware and informed, taxpayers and tax professionals can protect themselves and their data from scams and schemes that could cost them money, time, and peace of mind.
If you received an audit notice from the IRS and require genuine assistance, contact my office at (202) 618-1295 to book a quick chat with me. I am an IRS Enrolled Agent with a 99% win rate when it comes to audits.
Frequently Asked Questions
- What tax scams are going around?
Tax scams can take various forms, but some common ones include phishing emails or calls from impostors claiming to be IRS agents, fraudulent tax preparers, identity theft for tax fraud, and scams related to refund fraud. It’s essential to be cautious and verify the authenticity of any communication or request related to taxes.
- What are the most abused tax credits?
Certain tax credits are more susceptible to abuse due to their complexity or lack of proper oversight. Historically, earned income tax credit (EITC) and child tax credit have been vulnerable to abuse. To combat this, the IRS has implemented measures to verify eligibility and prevent fraudulent claims.
- Why am I receiving a refund?
You receive a tax refund when you have overpaid your taxes throughout the year, either through employer withholding or estimated tax payments. After filing your tax return, the IRS calculates your actual tax liability. If the amount you paid exceeds your tax liability, you receive a refund for the excess amount.
- Can you report scams on taxes?
Yes, you can report tax-related scams to the IRS. You can visit the IRS website to find detailed information on reporting tax scams, including phishing emails, fake IRS calls, and fraudulent tax preparers. Reporting scams helps the IRS take appropriate action and protect taxpayers from fraud.
- Who is paying the most tax?
The amount of tax an individual or entity pays depends on various factors, including income, deductions, credits, and tax laws. Generally, individuals with higher incomes tend to pay more in taxes, both in absolute terms and as a percentage of their income. Additionally, corporations with significant profits also contribute significantly to tax revenue in many countries.
- What country has the lowest tax?
Tax rates vary significantly by country, and what constitutes a “low” tax rate is relative. Countries like Bahrain, Qatar, and the United Arab Emirates are known for their low or zero tax rates. Additionally, several European countries, such as Monaco and Andorra, have low tax rates. However, it’s essential to consider other factors like the overall cost of living and the quality of public services when evaluating the attractiveness of low-tax jurisdictions. Tax laws are subject to change, so it’s advisable to consult updated sources or a tax professional for the most current information on tax rates.
