Tax season is stressful enough without scammers out there making it even worse. Sometimes it seems like wherever you turn, you’ll find some sort of tax scam designed to swindle honest taxpayers like you out of your hard-earned money, compromise your personal information and your finances, and sometimes even leave you holding the bag when the IRS comes a-knocking.
From IRS audit scams that prey on your fear with fake letters, emails, and phone calls accusing you of owing large amounts of back taxes to the government in order to bilk you out of money and sensitive information, to more general IRS tax scams that line their pockets from giving out bad or even illegal advice (that, of course, gets you, the honest taxpayer, in trouble and can lead to a real IRS audit), it can seem sometimes that there is no low tax scammers won’t stoop to.
The IRS doesn’t want you falling for these cheats and charlatans any more than you do, which is why every year they release their Dirty Dozen list—a list of the top 12 worst and most prevalent IRS tax scams and IRS audit scams targeting taxpayers like you. Let’s take a look at the 2023 IRS Dirty Dozen list and breakdown this year’s infamous tax scams:
2023 IRS Dirty Dozen: The Top 12 IRS Tax Scams, Schemes, and Cheats to Watch Out For
The IRS Dirty Dozen is an annual feed of news releases on the IRS website running down the 12 biggest IRS tax scams of the previous calendar year and beyond. It’s like the 12 Days of Christmas, but for tax scams, schemes, cheats, and con artists.
With the country in the middle of tax return season, the IRS advises taxpayers to pay close attention to the annual Dirty Dozen list to become familiarized with the most common ways scammers try to take advantage of honest American citizens.
Read on for a brief rundown of the top 12 IRS tax scams included in the 2023 IRS Dirty Dozen, along with links to learn more from the IRS’s website.
1. Employee Retention Credit Schemes and Scams
On the first day of Tax-mas, my true love gave to me—12 claims of false ERC!
To nobody’s surprise, the 2023 IRS Dirty Dozen list kicks off with warnings about ERC claims. The Employee Retention Tax Credit (ERC or ERTC), is a feature of the 2020 CARES Act that provided tax relief for small businesses that met specific criteria to claim ERC on their 2020 and 2021 tax returns.
We’ve written extensively about the prevalence of ERC scammers duping small business owners into claiming refunds through ERC they aren’t actually eligible for, just so they can collect a bigger contingency fee. These “ERC mills” popped up far and wide through 2021 and 2022 and are still out there in 2023, making exaggerated claims about ERC eligibility and muddying the waters with misinformation.
Unscrupulous third-party ERC preparers often charge high upfront or contingency fees, make massive misrepresentations about ERC eligibility, and otherwise dupe innocent small business owners into taking tax credits they aren’t eligible to claim.
The flood of ineligible ERC claims has gotten so bad that the IRS has, on multiple occasions over the past year, issued warnings about these aggressive ERC promoters and has even announced wide-scale audits of the entire ERC program due to the sheer volume of ineligible ERC claims these ERC mills have produced.
Ultimately, the taxpayer is responsible for all the information they provide on their tax returns—meaning if you’ve been taken advantage of by one of these aggressive ERC promoters and led into claiming Employee Retention Tax Credits you weren’t eligible for, you could end up with an ERC audit on your hands.
If you think you’ve been misled by an ERC mill, get in touch with a legitimate tax professional for a second opinion on your Employee Retention Credits right away. Tax professionals can perform a legitimate assessment of your ERC eligibility, and help you figure out the next steps to protect your livelihood. If your business was not eligible for ERC credit in 2020 or 2021 or was only partially eligible for the credit you claimed, filing an amended tax return for the calendar year in question can cut down or eliminate your risk of an ERC audit and help you sleep better at night.
If you’ve been informed by a legitimate IRS audit letter that you are being audited over ERC, reach out to us right away to prepare your audit defense. We’ll zealously defend you and make sure you get the best outcome possible.
IRS opens 2023 Dirty Dozen with warning about Employee Retention Credit claims; increased scrutiny follows aggressive promoters making offers too good to be true
2. Phishing and Smishing Scams
The second entry in the 2023 IRS Dirty Dozen concerns email and text scams: two of the most common and prevalent means by which cybercriminals attempt to steal your money and sensitive personal information by tricking you about refunds or tax issues.
Phishing (fraudulent emails) and smishing (fraudulent text messages) involve cybercriminals pretending to be a legitimate organization, such as your bank or the IRS, luring innocent victims into their scams by enticing them with promises of large tax refunds or frightening them with false legal or criminal charges for tax fraud.
Remember – the IRS will only contact you through regular certified mail, never through email, SMS messages, or social media DMs.
3. Swindlers Posing as “Helpful” Third Parties
Scammers are always finding new ways to swindle taxpayers out of money or personal information that they can then use for fraud and identity theft. Over the past year, the IRS has noticed an uptick in scammers offering to “help” taxpayers set up their IRS Online Account at IRS.gov, sometimes for a fee, making them number three on the 2023 IRS Dirty Dozen.
While “helping” you, these scammers will ask for information such as Social Security and Taxpayer Identification Numbers (SSN and TIN), which they can use to steal your identity or sell it to other identity thieves. With this sensitive information, they can file fraudulent tax returns, obtain loans, and open credit accounts at your expense.
You don’t need anybody’s help setting up an IRS Online Account—just go to IRS.gov and steer clear of the scammers.
IRS warns of scammers offering “help” to set up an Online Account; creates identity theft risk for honest taxpayers
4. False Fuel Tax Credit Claims
The ERC isn’t the only tax credit that gets abused as a means of false claim filing. Unscrupulous tax preparers and scammers also charge exorbitant rates and make extraordinary promises for fuel tax credits as well.
Fuel tax credits are meant for off-highway businesses and farms, and as such, are not available to most taxpayers. However, this IRS tax scam involves tricking taxpayers into making false fuel tax credit claims with the expectation of a windfall reward. What really happens, though, is that the taxpayer gets hit with inflated fees and refund fraud and can even have their personal information sold to identity thieves.
The IRS has stepped up its game when it comes to cracking down on false tax credit claims, making it even more important to keep your eyes peeled for these types of scams.
5. Fake Charities
Scammers using fake charities to dupe taxpayers is an old tradition, and this tradition sees renewed use whenever major disasters happen. Fake charities take advantage of two age-old human impulses—to be a helper when people are suffering, and to reduce their tax burden with charitable deductions.
When faced with a heart-wrenching situation and the promise of tax deductions, be vigilant and make sure to independently confirm that the charity or nonprofit you’re being asked to donate to is a legitimate 501(c)(3) organization. You can use the IRS’s Tax Exempt Organization Search tool to verify the charity is legitimate before making any donations.
6. “Ghost” Tax Preparers
It can be a downer when you get “ghosted” by a date or a job interview, but that doesn’t compare to the danger a “ghost” tax preparer can put you in. These unscrupulous tax preparers give out bad advice and then disappear as quickly as they appeared, stealing their targets’ personal information on the way out.
The IRS advises taxpayers to choose their tax providers as carefully as one would choose a doctor or lawyer and gauge prospective preparers against the common warning signs of shady, self-serving tax professionals.
IRS warns individuals to stay clear of shady tax preparers; offers tips on carefully choosing tax professionals
7. Bad Tax Advice on Social Media
Entries 7 and 8 on the 2023 IRS Dirty Dozen list are two peas in a pod. Social media can connect people from all around the world, but it also offers unprecedented reach for misinformation and IRS tax scams. Many scammers put out social media posts heavily promoting inaccurate, misleading, or just plain wrong information about how to file certain forms that put honest taxpayers at risk. Two of the most prominent are:
8. Fraudulent W-2 and Form 8944 Filing
Two common IRS form filing schemes of particular note are Form W-2 fraud and Form 8944 fraud, in which bad actors on social media platforms make claims about how to fill out these forms that will land innocent taxpayers in hot water with the IRS.
While IRS Form 8944, Preparer e-file Hardship Waiver Request, is a legitimate IRS tax form, it is used exclusively by tax professionals, not individuals. But some bad advice circulating online encourages individual taxpayers to misuse this form to avoid tax bills, which can lead to serious consequences—including civil and criminal penalties.
Taking tax advice on social media can be bad news for taxpayers; schemes circulating involving tax forms
This IRS tax scam is a cyber threat that targets businesses and other tax preparers in order to steal client data, tax software preparation credentials, and tax preparer identities in order to claim fraudulent tax refunds for themselves.
Two of the most common examples of spearphishing are when a cybercriminal impersonates a tax professional’s clients in order to access sensitive client information and when a cybercriminal targets payroll employees to access a business’s W-2s for its employees.
IRS urges tax pros and other businesses to beware of spearphishing; offers tips to avoid dangerous common scams
10. Offer-in-Compromise “Mills”
Unfortunately, any legitimate means the IRS provides to help taxpayers deal with the financial burdens of back taxes, penalties, and interest will attract scammers like moths to a flame. The Offer in Compromise (OIC), which allows taxpayers to settle their tax debts for less than they owe, is one such legitimate means that sees frequent misuse by scammers, which has cemented Offer in Compromise mills’ spot on the 2023 IRS Dirty Dozen list.
The Offer in Compromise is not a get-out-of-debt-free card, although it can reduce the burden of your tax debt. Be wary of OIC mills that advertise outlandish claims of “pennies on the dollar” returns and mislead taxpayers about their eligibility in exchange for a quick buck. Instead, get your OIC guidance from qualified tax professionals, like our team at Wiggam Law.
Watch out for Offer in Compromise ‘mills’ where promoters claim their services are needed to settle IRS debts
11. Charitable Remainder Annuity Trust Schemes
While most IRS tax scams target average taxpayers, there are specific scams that go after high-income filers. The 2023 IRS Dirty Dozen includes schemes that misrepresent Charitable Remainder Annuity Trusts (CRAT) and Monetized Installment Sales to prey on wealthy taxpayers exploring ways to donate assets to charity or defer tax payments on the sale of appreciated property.
Watch out for schemes aimed at high-income filers; Charitable Remainder Annuity Trusts, monetized installment sales carry risk
12. Bogus Tax Avoidance Strategies
Nobody likes paying their taxes, but if a way to get out of paying them or cutting your taxes sounds too good to be true, it probably is. The bogus tax avoidance schemes peddled by scammers across the United States take many forms and typically target high-income taxpayers.
The IRS advises wariness regarding abusive tax scheme promoters misusing micro-captive insurance payments, syndicated conservation easements, offshore accounts, digital assets, and other schemes in order to steal money, personal information, and more from their victims and put them in hot water with the IRS.
Stay Safe – Consult an Experienced Tax Attorney
Unfortunately, IRS tax scams are all too easy to fall for, which is why the IRS works so hard to curate its Dirty Dozen lists on an annual basis. The best way to avoid scammers, charlatans, and con artists in the tax world is to know what to look for and stay vigilant against tax break promises that seem too good to be true.
If you have more questions about the 2023 IRS Dirty Dozen list or are worried you may have fallen for one of these scams, get in touch with the experienced Atlanta tax resolution attorneys at Wiggam Law at (404) 233-9800 or contact us online. We’d be happy to answer your questions and advise you on how to keep yourself compliant with the IRS.
Have you run into an abusive tax scheme or tax return preparer? Fill out Form 14242, Report Suspected Abusive Tax Promotions or Preparers, or reach out to the IRS Whistleblower Office to see what you can do about it!