How to Avoid the IRS’s Dirty Dozen

The IRS’s annual “Dirty Dozen” list has returned, shedding light on evolving tax scams that can catch taxpayers, businesses, and tax professionals off guard. This annual campaign is designed to raise awareness about the variety of schemes that can emerge, particularly during tax season, but continue to pose threats throughout the year. The Dirty Dozen serves as a reminder to remain vigilant against these scams, which range from phishing emails to fraudulent tax preparers and beyond.

The consequences of falling victim to these schemes can include identity theft, monetary loss, and damage to one’s financial security. Therefore, understanding these scams and how to avoid them is crucial for safeguarding personal and business finances.

Understanding Phishing and Smishing

 

To effectively navigate the IRS’s Dirty Dozen, it’s essential to understand two of the most prevalent scams: phishing and smishing.

Phishing

Phishing is a scam where fraudsters send emails posing as legitimate organizations, including the IRS, tax agencies, or financial institutions. These emails often contain enticing offers, such as phony tax refunds, or alarming threats, such as legal action for tax fraud. The goal is to lure victims into clicking malicious links, downloading harmful attachments, or providing sensitive information.

Smishing

Smishing works similarly to phishing, but through SMS messages. Scammers send texts claiming to be from the IRS or another trusted organization, with alarming messages like “Your account is on hold” or “Unusual activity detected.” These messages include a link that, if clicked, can lead to malware infection or requests for personal information.

Recognizing the Threats

Phishing and smishing attempts can come from what appears to be legitimate organizations or individuals, including trusted brands or even friends and family. This is possible when scammers hack into or impersonate legitimate email accounts. These attacks can lead to identity theft, unauthorized access to sensitive data, or malware infections, including ransomware.

 

The Dirty Dozen: Recognizing the Scams

The IRS’s Dirty Dozen list compiles 12 of the worst tax scams, serving as a warning for taxpayers, businesses, and tax professionals to remain vigilant against these evolving threats. While these scams can emerge at any time, they peak during tax season, when individuals are preparing their returns or seeking help from tax professionals. It’s important to recognize these schemes to protect yourself from financial loss, identity theft, and other consequences.

Here’s a closer look at some key scams from the Dirty Dozen.

Bogus Tax Avoidance Strategies

Bogus tax avoidance strategies include illegal tax schemes that leverage international elements or deceptive financial tactics. These schemes can lead to hefty fines or legal actions.

• Examples include offshore tax avoidance strategies and improper art donation deductions.
• Another example is charitable remainder annuity trusts, which can lead to penalties if used improperly.

Fraudulent Tax Preparers

Fraudulent tax preparers exploit taxpayers seeking help with their taxes, leading to financial loss and identity theft.

• “Ghost preparers” promise to prepare taxes but then disappear, taking taxpayer cash or information with them.
• Offer-in-compromise “mills” falsely claim their services are necessary to resolve IRS debt, tricking taxpayers into paying unnecessary fees.

Fake Charities

Fake charities take advantage of taxpayer generosity, leading to financial loss and no real benefit to charitable causes.

• Scammers create false charities, urging taxpayers to donate, especially during tax season.
• Always verify the legitimacy of any charity before donating to avoid these schemes.

Other Schemes

Several other schemes can lead to financial losses or penalties.

• Inaccurate tax advice on social media: Misleading or false information circulating online can lead to tax errors and penalties, putting taxpayers at risk.
• Falsely padding deductions: Taxpayers or preparers may exaggerate deductions, resulting in audits, penalties, or legal consequences.
• Aggressive promoters of questionable Employee Retention Credit claims: These schemes can mislead small businesses into making improper claims, risking penalties or legal action.

Being aware of these scams and knowing how to spot them is essential for avoiding negative consequences.

 

Actions to Avoid Scams

Navigating the IRS’s Dirty Dozen list requires a proactive approach to protect yourself from the various tax scams and schemes. These scams can have serious consequences, from monetary loss to identity theft, and can undermine your financial stability. Here are some key actions to take.

Phishing and Smishing

Phishing and smishing are two of the most common scams targeting taxpayers and tax professionals, utilizing emails and SMS messages to trick victims into revealing sensitive information.

• Never click on unsolicited communications: Avoid clicking on any links or opening attachments in unsolicited emails or texts, even if they seem to be from legitimate organizations like the IRS. These can lead to malware infections, identity theft, or unauthorized access to sensitive data.
• Secure your accounts: Set up two-factor or multi-factor authentication for email and online accounts to add an extra layer of protection. This helps prevent unauthorized access, even if account credentials are compromised.
• Verify legitimacy: If you receive a communication from an organization or individual, verify its legitimacy through independent channels. For instance, directly visit the organization’s website or call a known phone number, avoiding the contact information provided in the message.

Reporting Scams

Reporting tax scams is crucial to helping authorities track and address these threats. Here’s how you can report different types of scams.

• Phishing attempts: Forward phishing emails, including their full headers, to [email protected]. This helps the IRS investigate and take action against these scams. Avoid taking screenshots or scanned images, as they remove valuable information.
• Monetary losses: If you suffer monetary losses due to IRS-related scams, report them to the Treasury Inspector General for Tax Administration (TIGTA), the Federal Trade Commission (FTC), and the Internet Crime Complaint Center (IC3). This can aid in investigations and prevent further losses.
• Fraudulent tax preparers: If you encounter unscrupulous tax preparers or promoters, report them via IRS Form 14242 or through the IRS Whistleblower Office, which may offer monetary awards for information leading to enforcement actions.

Staying Informed

Staying informed about evolving tax scams can protect you from falling victim to them. Here’s how you can stay updated.

• IRS resources: Regularly check the IRS website for updates on current scams and fraudulent schemes, including the Dirty Dozen list. This helps you stay aware of new tactics and better protect yourself.
• Security Summit: The IRS, state tax agencies, and the tax industry have been collaborating for nine years to provide education and internal security measures, helping to protect taxpayers and tax professionals from evolving threats. This includes initiatives like the Dirty Dozen campaign and year-round awareness programs.

By following these steps, you can protect yourself from the diverse range of scams on the IRS’s Dirty Dozen list, safeguarding your finances, personal information, and peace of mind.

 

Safeguarding Your Finances Year-Round

The IRS’s Dirty Dozen list provides a critical reminder to stay vigilant against tax scams throughout the year. By understanding key scams, taking proactive measures to avoid them, and reporting suspicious activity, taxpayers, businesses, and tax professionals can safeguard their finances and personal information.

 

Cukierski & Associates: Your Partner in Tax Compliance

Navigating the complexities of tax compliance can be overwhelming, particularly with the array of evolving scams targeting taxpayers and businesses. Cukierski & Associates understands these challenges and is dedicated to providing comprehensive services that protect clients from financial loss, identity theft, and other consequences.

Our team of experienced advisors specializes in helping clients avoid tax scams and schemes, ensuring regulatory compliance and safeguarding finances. From identifying common scams to implementing protective measures, we offer support every step of the way.

 

Safeguarding Your Finances Means Peace of Mind

We strive to streamline financial management and alleviate the stress of potential scams. By entrusting your tax needs to Cukierski & Associates, you can focus on your core activities, whether they involve managing a business or handling personal affairs.

We also offer solutions for addressing specific challenges commonly encountered by taxpayers.

• Identifying Tax Scams: Our advisors help clients recognize scams from the IRS’s Dirty Dozen list, including bogus tax avoidance strategies, fraudulent tax preparers, and other schemes.
• Ensuring Regulatory Compliance: We assist in maintaining full adherence to regulatory standards, minimizing potential risks, and avoiding fines or legal actions.
• Protecting Against Identity Theft: We guide clients in taking proactive measures to secure personal and business data, safeguarding against phishing, smishing, and other identity theft attempts.

Protecting your finances from tax scams is a vital component of successful financial management. This not only prevents losses and protects your identity but also provides peace of mind in managing personal or business affairs.

Start protecting your finances and securing your financial future today. Contact Cukierski & Associates for personalized solutions tailored to your needs. Reach out now to take the first step toward financial security and peace of mind.