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The IRS’s 2021 ‘Dirty Dozen’ Tax Scams: Ruses Focusing on Unsuspecting Victims

The easiest prey are those who don’t see it coming. That’s why fraudsters frequently target unsuspecting victims — especially during tax season.

Every year, the IRS releases its “Dirty Dozen” — a list of 12 prominent or up-and-coming tax scams that Americans should be aware of. 2021’s list is finally here, and it looks like the most unsuspecting victims are the ones who need to keep a close eye out for a few frauds.

In past years, the IRS has released all 12 Dirty Dozen tips at once, but this year, it parceled out the list across four broader themes that we’ll cover in detail. This week’s focus? Fraudsters targeting groups like seniors or immigrants, posing as fake charities, impersonating IRS authorities, charging excessive fees for offers in compromise, conducting unemployment insurance fraud and unscrupulously preparing tax returns.

The Dirty Dozen: Unsuspecting Victims

The IRS highlights five common scams targeting unsuspecting victims:

Fake charities

Many Americans claim charitable donations on their federal tax return to reduce their taxable income. Just one problem: You can’t receive a deduction if you’ve donated to an unqualified charity — and certainly not if you’ve donated to an outright fake one.

The IRS notes that scammers will set up fake organizations to take advantage of generous people. They tend to focus their efforts heavily around tragedies and disasters, such as hurricanes, tornados and, most recently, COVID-19. And they most frequently contact victims over the phone.

How do you sniff out a scam charity? Among other things, real charities rarely apply heavy pressure, so if you’re feeling rushed, disengage. Some scam charities use names that are similar to existing organizations, so ask for the charity’s exact name, web address and mailing address to confirm those details for yourself later. Also, beware charities that ask for donations via gift card or wire transfer — check and credit card are the typical avenues of payment.

Immigrant/senior fraud

As we’ve mentioned frequently in previous articles, scammers love to impersonate the IRS. They also have favorite targets: Namely, unsuspecting victims with limited English proficiency, as well as senior citizens.

So, we remind readers that the IRS will typically make contact through the mail, not the phone, email or social media. It will not threaten to revoke driver’s licenses or have an immigrant deported. If someone contacts you in this manner, ignore them.

The IRS reminds senior citizens about the availability of Form 1040SR — a Form 1040 specifically for seniors.

The IRS also points out resources for those not proficient in English. The Schedule LEP lets taxpayers select the language they want to communicate in, and IRS Publication 17 is now available in several languages.

Offer in compromise “mills”

An offer in compromise (OIC) is an agreement between a taxpayer and the IRS to settle the taxpayer’s tax debt.

You may have seen ads for firms claiming they can settle Americans’ tax debts for “pennies on the dollar.” Some of these businesses are called offer in compromise mills, and they can’t actually provide the service they promise.

“Taxpayers should be especially wary of promoters who claim they can obtain larger offer settlements than others or who make misleading promises that the IRS will accept an offer for a small percentage,” the IRS says. “Companies advertising on TV or radio frequently can’t do anything for taxpayers that they can’t do for themselves by contacting the IRS directly.”

If you’re curious about whether you’re eligible for an OIC, check out the Offer in Compromise Pre-Qualifier Tool on IRS.gov.

Unscrupulous tax return preparers

Similarly, a lot of people are drawn in by tax preparers promising massive tax refunds. That’s one potential red flag of unscrupulous tax return preparers.

The IRS notes that tax preparers must have a valid Preparer Tax Identification Number (PTIN), and must sign and include their PTIN on the return — period.

Other danger signs: requiring payment in cash-only and/or not providing a receipt, “inventing” income to qualify you for a tax credit, and claiming fake deductions to boost your refund. And these fake preparers might direct your refund into their bank account, not yours.

If you’re looking for a personal tax preparer, check out the IRS’s Choosing a Tax Professional page. If you’re looking for a business tax preparer, check out McManamon & Co.

Unemployment insurance fraud

A scheme that has been run en masse during the pandemic is unemployment insurance fraud. The IRS notes that this is when scammers try to collect state and local assistance to which they’re not entitled.

Unemployment fraud has many different forms. In some cases, filers use stolen or fake identification info to submit applications for unemployment payments. In others, filers either claim they work for a legitimate company, or submit fictitious employee and wage records from a fictitious company to apply for benefits. And in still others, state employees use credentials to inappropriately access or change unemployment claims to approved unqualified applications, improper payment amounts, or move unemployment funds to different accounts.

Don’t Become a Victim

If you’re an individual taxpayer, you can find plenty of useful information on our website. McManamon & Co. also offers a wide array of services to small and midsize businesses, including tax services such as filing, planning and compliance. Learn more about the myriad ways McManamon & Co. can help your organization. Call us at 440.892.9088 or contact us online today.

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