What are the worst tax schemes and fraudulent tactics? The Internal Revenue Service (IRS) updates its “Dirty Dozen” list of the 12 dirtiest tax scams  to watch out for each tax season. While they change a bit annually, many of these top schemes remain on the list from year to year. 

From following a social media trend toward a bigger refund to having your money or identity stolen via phishing, phone, or social media scams and engaging in abusive tax arrangements, these schemes could leave you in hot water with the IRS. In fact, they could lead to a higher chance of being audited — or even fines and criminal charges. Let’s look at some of the tax schemes you should be aware of year-round.

The Dirty Dozen

1. Phishing and Smishing

These two ruses have appeared on many a past dirty dozen list, but phishing and smishing often make the number-one spot. They include texts or emails that seem to be from the IRS … but aren’t. Attackers have also broadened this scam in recent years to include fraudulent calendar appointments as well as social media posts and direct messages (DMs). If you smell something fishy — like the promise of a big refund or someone claiming to be an IRS officer requesting banking information or authorization — do your due diligence. 

Does the IRS Even Send Emails?

Yes, but it’s not their first point of contact. The IRS starts by contacting taxpayers via a notice or letter in the old fashioned snail mail. While they may make phone calls or send emails, they’ll never send a text without your permission if you opt in. Additionally, IRS agents won’t harass or threaten taxpayers, and they won’t leave pre-recorded voice messages, either. What else won’t they do? Request payment via a gift card or other type of prepaid card. Learn how to spot a suspicious or outright fake email, social media message, text, phone call, physical mail, or fax and report it via the IRS website. Remember to never click or tap a link or attachment if you think it looks amiss. 

2. AI Voice Impersonation

As the strength of artificial intelligence grows, its ability to generate written and vocal content does, too. And while phone scams have long existed, today’s caller ID spoofing and voice mimicry, as well as the robocalls that employ them, are more realistic than ever. It’s important to keep in mind that the IRS will most likely send snail mail long before contacting taxpayers via phone. If you receive a call demanding payment, hang up and check your IRS Online Acount or contact the IRS at a legitimate number, rather than providing any information to an AI spoofer. 

3. Fake Charities

Considering donating to a charity … but it’s one you haven’t heard of before? Or maybe it sounds familiar, but you suspect that something’s off. Beware of solicitors from fake charities — even those with names that sound reputable. Scammers tend to use names similar to actual charities for their fakery, and they often prey on donors who want to assist victims of natural disasters. Don’t feel pressured to make your donation, and remember that you can check for legitimate charities using the IRS’s Tax-Exempt Organization Search.

4. Bad Tax Advice from Social Media

If you see a hot tax tip on TikTok or Instagram, you might want to run it by your tax preparer before falling victim to the harm it could do. Social media is great for spreading excitement — and honest tax information is usually the opposite of thrilling. There’s no magic way to increase your tax refund or decrease your balance due. Using tax hacks can instead lead to audits, delays, or even civil and criminal penalties, so watch out for bad advice spreading on your favorite social media channels.

5. Identity Thieves Accessing Your IRS Online Account

If someone offers to assist you in setting up an IRS.gov account, it just might be a scam. That’s because your IRS Online Account offers access to your tax information, which is chock full of personal info, from your address to your Social Security number and more. It also includes your bank account information, and giving a scammer access to your IRS account could also offer them the opportunity to get their hands on your tax refund. 

6. Abusive Long-Term Capital Gains Reporting

Owners of shares of certain funds or real estate trusts can claim credits on undistributed capital gains, but using Form 2439 to do so is not available to everyone. The IRS is seeing more falsely used Forms 2439 along with claims linked to common organizations. Your tax preparer can help you understand if you’re legitimately eligible or not.

7. Self-Employment Tax Credit

Incorrectly claiming a “self-employment tax credit” to get a bigger refund could get you into hot water with the IRS. A common social media promotion, it’s usually too good to be true, as most taxpayers don’t qualify. The IRS is monitoring these claims closely, and you should, too. 

8. “Ghost” Tax Return Preparers

Some fraudsters make themselves out to be upstanding tax preparers — but they’re actually out to scam their clients. Some dishonestly lead their clients to take credits and deductions that they’re not entitled to so they can increase the fees they charge. Others won’t sign the tax returns they’ve prepared or will direct refunds to their own bank accounts and then “ghost” their clients. Remember, you’re legally responsible for the information included on your tax return — even if a tax preparer does your taxes for you — and the IRS requires paid preparers to provide a valid Preparer Tax Identification Number (PTIN). 

9. Falsifying Non-Cash Charitable Donations

Buying property, overinflating its value, and donating it for a bigger tax deduction is an IRS no-go. Often fraudulently used for syndicated conservation easements or artwork, unscrupulous promoters promise to reduce tax balances due or increase refunds. If you’re donating property, honesty about its value is key.

10. Overstating “Other Withholding”

In this scheme, fraudsters push taxpayers to increase their withholding amounts to inflate refunds. They may also encourage taxpayers to understate their income on the wrong forms. 

11. Spear-Phishing

Spear-phishing is to tax preparers as phishing is to taxpayers. In cases of spear-phishing, fraudsters pose as everyday taxpayers and reach out to tax preparers or businesses as “new clients” or with “document requests.” These spear-phishers attempt to initiate cyberattacks on these tax preparers and businesses to extort them or steal their clients’ data. Throughout tax season, I’m always on the lookout for scams when I receive emails from addresses whose owners I haven’t interacted with in the past. I know that our security measures are robust, and I appreciate you following your tax preparation process as it helps protect you and your fellow FPFoCo clients.

12. Offer in Compromise “Mills”

For those with federal tax debts, the IRS may offer to compromise on amounts owed, allowing taxpayers to pay less than the full debt amount. While legitimate Offer in Compromise (OIC) assistance does exist, some fraudsters heavily advertise their services. They aim to mislead indebted taxpayers by charging exorbitant amounts while promising to help the taxpayers settle for far less than they owe the IRS. However, many of the taxpayers these scammers target won’t qualify for compromise, or the fraudsters will charge for services that the taxpayers don’t need and could accomplish themselves. If you think you might be eligible, check out the IRS’s free Offer in Compromise Pre-Qualifier tool.

Protect Yourself from Scams

What can you do to avoid falling victim to a fraudster? The first step is to be aware of their malicious tactics — and keep an eye out for red flags. 

It’s also important to remember that taxpayers pay amounts due to the “United States Treasury” — and nowhere else. And the IRS’s main method of contacting taxpayers is through the United States Postal Service. They won’t reach out to taxpayers via social media, email, phone, or text. If an IRS official does come knocking, they’ll show you two forms of ID to prove their identity so you know they’re not a scammer. 

And remember, you don’t have to go it alone. As a comprehensive services client, your professionally filed tax return is included in your ongoing services fee. I keep an eye out for scams and schemes like these year-round so I can avoid them and help you do the same. When it comes to tax preparation, tax planning, and so much more, you can count on your financial planning team here at FPFoCo!