As tax season approaches, so does the potential for falling prey to various tax scams that can cost individuals and business owners significant amounts of money and compromise sensitive data. According to the Better Business Bureau, the toll of tax scams and fraud reached $5.7 billion in 2022 alone. In this article, we’ll explore the key scams to be aware of in 2024 to minimize the risk of becoming a victim.
Understanding Legitimate IRS Communication Channels
To reduce the risk of falling for IRS scams, it’s crucial to know how the Internal Revenue Service communicates with taxpayers. The IRS primarily uses physical mail for official communication and may resort to phone calls if necessary. However, they never initiate contact via email, text messages, or social media to request personal or financial information. If in doubt, refer to this article for guidance on authenticating communication from the IRS.
Top Tax Scams to Watch Out For
The Refund Scam: The IRS warns taxpayers about a common scam involving deceptive notifications claiming an “unclaimed refund.” These formal-looking letters or packages often bear an IRS logo and request sensitive personal details, including driver’s license images. Stay cautious and skeptical of such communications, verifying their legitimacy before responding.
Identity Theft: Cybercriminals can file fake tax returns using stolen personal information, leading to potential refund payments. To prevent tax identity theft, consider obtaining an Identity Protection PIN from the IRS before filing your return. Filing early and promptly addressing any suspicious notices from the IRS can also mitigate the risk.
The ERC Scam: The Employee Retention Credit (ERC), sometimes called the Employee Retention Tax Credit, or ERTC, is a refundable tax credit against certain employment taxes. The IRS and tax professionals continue to see aggressive broadcast advertising, direct mail solicitations and online promotions involving the ERC. While the credit is real, aggressive promoters are misrepresenting and exaggerating who can qualify for the credit.
This has led the IRS to issue many warnings about ERC schemes from third-party promoters that charge large up-front fees or a fee based on the amount of the refund. These promoters may fail to inform taxpayers that they must reduce wage deductions claimed on the business’s federal income tax return by the amount of the credit.
Businesses, tax-exempt organizations and others thinking about applying for the ERC need to carefully review the official requirements for this credit before they claim it.
The “Impact Payment” Scam: A new online scam involves fake emails displaying the IRS logo, claiming to address the “third round of economic impact payments.” Be cautious of emails prompting you to click on links or provide information. Verify the legitimacy of such communications through official channels. The e-mail asserts that certain inconsistencies or missing information have been identified and assures recipients that a refund of $976 awaits them upon submission of the required document. Notably, there’s a button labeled “complete my information,” but IRS Media Relations Specialist Robert Marvin urges you not to click it.
The “Additional Information Needed” Scam: Emails requesting taxpayers to submit tax forms directly should be treated with caution. Legitimate forms usually go through companies, not directly from the IRS. Disregard such messages and report potential scams to the IRS.
Another Tax Agency Scam: Scammers may impersonate legitimate or fictitious tax agencies during phone calls. Exercise caution and skepticism, obtaining reference numbers if possible and initiating return calls using officially verified phone numbers to protect against potential scams. Instances include impersonating entities like the Taxpayer Advocate Service or the nonexistent Bureau of Tax Enforcement. While the Taxpayer Advocate Service is a legitimate entity, it does not initiate unsolicited calls to taxpayers. On the other hand, the Bureau of Tax Enforcement is not a genuine organization. Exercise caution and skepticism toward unsolicited calls alleging to be from government agencies.
Protecting Yourself During Tax Season
With the prevalence of tax scams, taking proactive measures is essential. File your taxes early to reduce the window for potential impersonation, vet tax preparers thoroughly, and consider utilizing fraud protection services for an added layer of security. Remember, cybercriminals are relentless, and a comprehensive cybersecurity system is crucial to safeguard your organization against various threats.
As part of your security measures, consider scheduling a FREE third-party security assessment to identify vulnerabilities in your network and develop a plan to address them. Click here to schedule your no-obligation assessment for peace of mind.
