IRS Releases List of “Dirty Dozen” Tax Scams for 2024
Each year, the IRS releases its “Dirty Dozen,” a list of tax scams that taxpayers should be wary of. The list highlights common scams that put people at risk of losing money, personal information, data, and more. Here are the 12 scams that you should be aware of in 2024:
Text message and email scams. Criminals attempt to steal personal information by posing as legitimate IRS or state tax agency professionals through “phishing” and “smishing” scams by trying to trick you into clicking on suspicious links. They may offer fake refunds or try to scare you into giving up your information by saying you’re being charged with tax fraud. Remember, the IRS initiates most contact through mail and will never contact taxpayers through email, text, or social media regarding a tax bill or refund.
Employee Retention Credit scams. The IRS warns businesses about aggressive and unscrupulous promotors pushing questionable Employee Retention Credit (ERC) claims. There are very specific guidelines on who can claim the credits and how, but some marketers will encourage businesses to submit a claim even if they are ineligible, putting the business at risk of penalties. The IRS is stepping up enforcement, so enterprises are urged to be diligent when applying for the ERC.
IRS Online Account setup “help.” Taxpayers are urged to be wary of scammers who try to sell or offer their help in setting up an Online Account with the IRS because it may put you at risk of identity theft. Taxpayers should not need assistance from a third party in setting up an account; allowing these scammers to help you gives them access to your personal information, which they can use to file a fraudulent return and claim your refund.
False Fuel Tax Credit claims. Promoters may improperly push Fuel Tax Credit claims that most taxpayers are not even eligible for. This particular credit is only available for off-highway business and farming use, but some promoters will convince taxpayers to falsely claim the credit to inflate their refunds while collecting their own high fees and leaving the taxpayer at risk of penalties.
OIC mills: Offer in Compromise (OIC) is a legitimate and valuable IRS program that may allow a taxpayer to settle a tax debt for less than the full amount owed. OIC “mills,” however, are third-party marketers who claim they can settle your bill for pennies on the dollar while also charging excessive fees. Taxpayers can easily obtain information about their qualification status for free from the IRS instead of paying for the same service by working with these “mills.”
Fake charities: During times of major disasters, the threat of scammers creating fake charities to steal money and personal information is high. Taxpayers are urged to remain vigilant about charitable donations. Take the time to do your research, verify the charity’s authenticity, and be cautious about the method you use to donate (credit card or check is best).
“Ghost” tax preparers. Every year, “ghost preparers” crop up, encouraging taxpayers to take advantage of credits and benefits they don’t qualify for. They charge a large fee and sometimes even steal the refund, then disappear, leaving the taxpayer to deal with the ramifications. In addition to urging you to claim ineligible credits and deductions, other warning signs that your tax preparer is less than honorable include fees based on the size of your refund, refusing to sign your return, or directing your refund into their account instead of yours. Always check your tax preparer’s credentials because you are ultimately responsible for all of the information on your tax return.
Bad advice on social media. Social media is full of inaccurate, misleading, and fraudulent tax advice. Scams include misinforming taxpayers about documents such as W-2s or Form 8944, both of which encourage people to submit false information in hopes of getting a bigger refund. It’s important to be wary of information you see online and to verify it with trusted sources, like the IRS.
Spearfishing. Spearfishing scams are aimed at tax professionals and businesses, urged to be wary of suspicious email requests that can attempt to steal client data, tax software preparation credentials, and preparer identities. The “new client” spearfishing scam is particularly common; in this scheme, cybercriminals pose as new clients and when a tax preparer responds to their email, they send a malicious link or attachment that can compromise computer systems and allow them access to sensitive information.
Schemes targeting wealthy filers. Wealthy taxpayers are targeted in many schemes designed to reduce their taxes. Three scams are widespread. The first is improper art deduction donations. Taxpayers are encouraged to purchase art at a “discounted” price and, after a year, claim a tax deduction for an inflated market value of the piece. Another scam uses a Charitable Remainder Annuity Trust (CRAT) to eliminate taxable gain. By transferring, instead of selling, appreciated property to a CRAT, the assets receive a gained step-up in basis that is not recognized when sold by the CRAT. The last scam is claiming the use of a monetized installment sale in exchange for a fee, which improperly delays the recognition of gain on appreciated property.
Fraudulent tax avoidance schemes. Taxpayers are urged to be cautious of people peddling bogus tax schemes that aim to reduce or avoid taxes altogether. These can involve abusive micro-captive insurance arrangements and syndicated conservation easements to claim charitable deductions improperly.
International tax scams. US residents, generally, must report and pay tax on worldwide income. Money in offshore accounts and digital assets are not out of the reach of the IRS, regardless of what unscrupulous promoters may say. Taxpayers are also cautioned against attempting to avoid tax by making contributions to individual retirement arrangements in Malta, particularly, or other foreign countries.
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If you have questions about the information outlined above or need assistance with a tax or accounting issue, Klatzkin can help. For additional information, call 609-890-9189 or click here to contact us. We look forward to speaking with you soon.