The IRS has issued the most recent in a series of press releases that highlight the top twelve tax scams for 2021. This release adds five new entries to this list. All of these scams exploit people’s natural goodwill either to trick people into doing something illegal or to allow crooks to take something from people. Here’s a quick summary:
The first scam mentioned is when a scammer sets up a bogus charity, especially after a high profile disaster like the recent one Surfside Condo Collapse, asking you for a charitable contribution to help the victims of the disaster, while you are only lining the pockets of the scammer. If you receive a donation request, consult the organization on Finding IRS Tax Exempt Organizations website to see if it is legitimate.
Here are some tips from the IRS on bogus charity scams:
- Individuals should never allow a caller to pressure them. A legitimate charity will be happy to get a donation at any time, so there’s no rush. Donors are encouraged to take the time to do the research.
- Potential donors should ask the fundraiser for the exact name, web address, and mailing address of the charity, so they can be confirmed later. Some dishonest telemarketers are confusing names that sound like big, well-known charities.
- Pay attention to how a donation is paid. Donors should not work with charities that ask them to pay by donating numbers from a gift card or by transferring money. This is how crooks ask people to pay. It’s safer to pay by credit card or check – and only after doing some research on the charity.
The second most common scam is one that targets vulnerable populations, including the elderly and immigrants. This usually involves someone calling and posing as a government employee, such as an IRS or ICE agent, and threatening fines, revocation of a driver’s license or status. immigration or even jail time, unless the person makes an immediate cash payment. Remember that the IRS, like most government agencies, will always contact you in writing by mail and never by phone. No matter how threatening (or helpful) they seem, hang up and contact someone you trust.
The third scam mentioned is the so-called “Mills Compromise”. These are third parties who promise to pay off the tax debt for “pennies on a dollar” and end up charging you exorbitant fees for a formal compromise that would have cost you a lot less if you went directly through the IRS.
The fourth scam mentioned concerns unethical or unscrupulous tax preparers. These are “ghosts,” who are paid to prepare the return but refuse to sign as a paid preparer and do not have a PTIN, the preparer’s tax ID number issued by the IRS. These phantom tax preparers often require cash-only payment and will not provide a receipt, invent income to qualify their clients for tax credits, claim bogus deductions to increase the refund amount, and direct your refunds to them. bank account, not yours. .
The fifth scam mentioned is unemployment insurance fraud. Red flags for unemployment fraud include: unemployment benefits come from a state other than the state in which the client resides or has previously worked; several state unemployment benefits are paid within the same payment period; unemployment benefits are paid in the name of a person other than the account holder or in the name of several recipients of unemployment benefits; numerous deposits or electronic fund transfers (EFTs) are made which indicate that they are unemployment benefits paid by one or more states to persons other than the account holder (s); and, a higher amount of unemployment benefits is observed in the same period compared to similar clients and the amount they received.
Unemployment insurance fraud is closely linked to other types of fraud, including:
Identity fraud: Filers submit claims for unemployment benefits using stolen or fake credentials to perpetrate an account takeover.
Fraud by employer-employee collusion: The employee receives unemployment insurance benefits while the employer continues to pay him reduced and undeclared wages.
Misrepresentation of Income Fraud: A person returns to work and fails to report income in order to continue to receive unemployment insurance benefits, or in order to receive higher unemployment benefits, applicants claim higher wages than they actually have won.
Fictitious employer-employee fraud: Filers falsely claim they are working for a legitimate business, or starting a fictitious business, and provide fictitious employee and wage records to claim unemployment insurance payments.
Insider fraud: Government employees use credentials to inappropriately access or modify unemployment claims, resulting in the approval of unqualified claims, inappropriate payment amounts, or transfer of unemployment funds to accounts that are not on the application.
It’s embarrassing and humiliating to admit you’ve been scammed, but there really is no reason to. Everyone has been targeted, sometimes multiple times, and everyone ends up falling for scams. What is important is to learn about possible tax scams and if you are not avoiding getting scammed, to contact the authorities and financial institutions as quickly as possible to minimize the damage caused.