By Steve Tepper, CFP®, MBA

It’s time for the least fun and entertaining top 10 list: the top tax and fraud scams of the year as reported by the IRS. Activity has been high this year—as it usually is during and following a time of disaster or crisis since government relief programs result in billions of dollars of benefits for thieves to go after.

1. EIP theft: As Economic Impact Payments (EIPs) were sent to most U.S. taxpayers earlier this year, scammers saw a golden opportunity. They called and emailed people claiming to be from the IRS, asking for banking information so the payment could be deposited. The real IRS never initiates contact by phone, email, or text and will never ask for your bank information, Social Security number, etc. If you receive such a communication, hang up or delete!

2. Unemployment fraud: At the height of the pandemic, tens of millions of people lost their jobs, and while thankfully most were short-term layoffs, unemployment benefit payouts have been at record levels for much of the past two years. That’s a lot of enticement for scammers. They have filed fraudulent claims for unemployment compensation using stolen personal information. If you then attempted to file your own claim, your application would be denied. Even worse, if uncorrected, the benefits the thief received would be reported to the IRS as income to you. If that happens, you would receive a Form 1099-G that shows the income, in which case you would have to report the error to your state unemployment agency.

3. Phishing: It’s the old tried-and-true scam and never goes away because it’s simple and effective—a fake email that just looks legitimate enough to get you to click or open. Once opened, they either ask for personal information or download malware to your device. Phishing emails that appear to come from the IRS are popular because how many people would delete an email from the IRS? Well, hopefully you will because you know the IRS doesn’t communicate with taxpayers that way.

4. Social media scams: You’ve seen it before, probably many times: A friend request from someone you’re pretty darn sure you’re already friends with. A few minutes later, the actual person posts on their social media feed: “I’ve been hacked. Don’t accept any friend requests from me.” By masquerading as someone you know, scammers will try to get personal information from you or send something that looks like a charity or donation link (but isn’t).

5. Vishing: Voice-related phishing, or vishing, has become more popular, particularly related to federal tax liens. As with other scams, be wary of providing personal information to someone who has called you out of the blue. If it doesn’t sound kosher, it probably isn’t. Hang up immediately.

6. Ransomware: Ransomware is malicious software that encrypts your data and programs, blocking access until you pay a ransom to get a code to unlock encryption. I’m sure you remember the incident last spring when oil pipelines were shut down across the southeast U.S. following a ransomware attack. That one cost Colonial Pipeline a reported $5 million. As with the other schemes in this list, good cybersecurity practices are your best defense. Never open or click on links from untrusted sources.

7. Fake charities: Here’s something I saw pop up on social media just a couple days ago: Someone posted a video of their sick kid in the hospital, then someone else stitched that video to a new video, providing donation information for a GoFundMe account for the family. But it turns out the family wasn’t involved with the fundraising effort at all and is getting none of that money. It was a scam. Taking advantage of people’s good nature is one of the easiest ways to rob people. Always check out any charity or fundraiser before donating.

8. The IRS impersonation call: The ominous robocall announces “law enforcement will be dispatched to your location in 30 minutes,” followed by instructions to resolve an outstanding tax bill. You don’t have time to figure out if it’s legitimate. It’s the scariest of scare tactics, and it works on a lot of people, particularly seniors. Of course, it’s always a scam. Neither the IRS nor local police operate that way.

9. Offer in Compromise (OIC) companies: Advertising that they can help you resolve your IRS tax bill for a fraction of what you owe, these companies sell something they usually can’t deliver. While sometimes the IRS does resolve a taxpayer’s debts for less than the full amount owed, most filers will not meet the requirements. The company will charge you hundreds, maybe thousands, of dollars to help you complete an application you could fill out on your own, for a program they know you aren’t going to qualify for.

10. Ghost preparers: Of course, most CPAs are ethical and trustworthy, but beware if the person doing your taxes doesn’t sign the tax return declaring that they prepared it for you. If they aren’t signing, it’s a warning sign that they plan to claim later that they didn’t file it. Why might they want to do that? Well, let’s say they promise you a big refund and charge you accordingly, but they’re generating that high refund with some shenanigans they know will probably be rejected by the IRS. Always use a reputable CPA, don’t let the price be determined by the amount of your refund, and make sure the preparer signs the return!

Sadly, this isn’t even close to a comprehensive list of the scams and schemes run by unscrupulous criminals. Whenever you are in doubt, call your trusted tax professional. If you don’t have one, give us a call. We work with many CPAs whom we find to be competent and trustworthy, and will happily make a referral for you.