Back in the late sixties, MGM released a movie called The Dirty Dozen, which starred Lee Marvin as a US Army Major. The Major was assigned a dozen convicted murderers to train, and lead on a mission to assassinate enemy officers during World War II. You can easily see where the movie’s title comes from.
A couple of weeks ago the IRS released its 2015 list of Dirty Dozen tax scams, warning taxpayers about the most aggressive and prevalent scams they are currently seeing and addressing. Many of these scams peak during tax season, so taxpayers need to be particularly cautious this time of year.
Tax related identity theft continues to be a major headache for the IRS, and for those victimized by someone who has managed to steal their social security number and other personal information. Taxpayers commonly find out that their identity has been stolen when they attempt to e-file their tax return, only to have it be rejected because a current year return has already been filed by someone else.
How much of a problem is this? The IRS says that their efforts to filter and identify fraudulent returns have resulted in the stopping of 19 million suspicious returns, claiming over $63 billion in fraudulent refunds. These statistics are only since 2011, and they admittedly have much more work to do in this area!
How can you protect yourself from identity theft and the other scams that are out there?
- Choose return preparers carefully– The IRS website has a feature called “Directory of Federal Tax Return Preparers with Credentials and Qualifications.” The writer was pleased to find his own name come up in the directory when a test search was performed. Unscrupulous tax preparers have been known to be a source of identity theft, as well as having been caught filing inflated refund claims for taxpayers, in order to generate higher fees for themselves. Be wary of a preparer promising outlandish refund claims, promoting abusive tax shelters or filing fake documents (w-2 or 1099 forms) in order to make your income appear lower than it really is. Remember that you are legally responsible for what is on your tax return even if it is prepared by someone else.
- Watch out for Phone Scams and Phishing – Two of the IRS’s most problematic scams involve a surge of phone scams, fake e-mails (phishing) or websites purporting to be the IRS, but in reality they are nothing more than scams designed to convince you to send in money or divulge personal information. Scam artists have been known to call and threaten all kinds of things including police arrest, deportation and other acts, if fictitious tax liabilities are not cleared up immediately. Particularly vulnerable to these types of scams are the elderly and those for whom English is not their first language. The objective of these calls is to convince the victims to send a payment, usually by a prepaid debit card. The phishing scams are usually designed to make you believe that you need to update or verify personal information, when in reality you are providing it to the scam artist, not the IRS. Remember that the IRS will always send a letter to communicate with taxpayers if there are legitimate unpaid tax obligations. They do not initiate contact with taxpayers by e-mail, text messages or social media websites. If you do receive a call and think you may legitimately owe taxes, hang up and call the IRS at 1-800-829-1040.
- Fake Charities- Groups masquerading as charitable organizations to solicit donations or obtain personal information from unsuspecting contributors, also made the IRS’s Dirty Dozen list. Many use names or websites that sound or look like those of legitimate organizations. This is particularly common right after a natural disaster when new organizations pop up overnight purporting to aid disaster victims. To keep from being scammed by one of these organizations the IRS cautions you to avoid giving out personal information such as social security numbers or passwords. The IRS has a search feature on its website (Exempt Organizations Select Check) through which donors can check an organization’s authenticity before donating monies.
So be careful out there, this blog covered only the most common scams. As the Major quickly found out, one must constantly be on guard to avoid becoming a victim when dealing with the Dirty Dozen.
—Don Karlewicz, CPA, Managing Partner