The Dirty Dozen: 12 Common Tax Scams

Security & Fraud

According to preliminary results from the 2024 tax filing season released by the Treasury Inspector General for Tax Administration, the Internal Revenue Service (IRS) reported that, as of February 24, 2024, it had identified 32,616 tax returns with nearly $273 million claimed in fraudulent refunds. Luckily, the IRS successfully prevented the issuance of 96.3% of those refunds.

While these fraud statistics are alarming, it’s important to remember that there are steps you can take to protect yourself from tax-related scams.

After each tax season, the IRS compiles a list of 12 common scams called the “Dirty Dozen.” The 2024 Dirty Dozen list includes the following scams to watch for during tax season and year-round.

1. Phishing and Smishing

Have you ever received an email or text message claiming to be the IRS during tax season? If you receive one of these unsolicited emails (phishing) or text messages (smishing), delete it. 

The IRS will never contact you through email, text, phone, or social media requesting personal or financial information. Most of their communications come through regular mail.

Learn how to spot and avoid phishing and smishing fraud attempts.

2. Employee Retention Credit Claims

The Employee Retention Credit (ERC) is a refundable tax credit that some eligible businesses and tax-exempt organizations can claim if they had employees affected by the COVID-19 pandemic. Individuals are not eligible to claim this credit.

Look out for third-party representatives or advertisements claiming you are eligible. These could be scammers trying to steal your personal information or attempting to take a hefty percentage fee of the potential claim.

Before claiming, confirm your business or organization’s eligibility with the IRS or consult with a trusted tax professional.

3. “Third-Party” Online Account Help

If a third-party representative contacts you and offers to help set up your IRS online account, decline their offer. This could be a scammer wanting access to your personal tax and financial information so they can commit identity theft.

Taxpayers should set up an online account on their own through the IRS website.

4. Fuel Tax Credit Claims

Most taxpayers cannot claim the Fuel Tax Credit intended for off-highway business and farming use. Yet, this doesn’t stop unscrupulous promoters from marketing it.

Look out for third-party representatives encouraging you to claim this credit and offering to help in exchange for a large fee. They may even offer to create fake documents or receipts for fuel.

Instead, confirm your eligibility with the IRS or a trusted tax professional before claiming.

5. Offer in Compromise “Mills”

The IRS’s Offer in Compromise program helps individuals who cannot pay some or all their tax debts. But look out for “mills” that falsely advertise the program’s requirements or offer to help settle your tax debt in exchange for a fee.

To see if you’re eligible for the Offer in Compromise program, use the IRS’s Pre-Qualifier tool.

6. Fake Charities

If a supposed charity contacts you and expresses an urgent need, pressures you to donate, or asks for donations via gift card or wire transfer, it is likely a scam.

Before donating, use reputable websites such as Charity Watch or Charity Navigator to assess the organization’s legitimacy.  

And remember, never give out personal or financial information, including your Social Security number, credit card number, or personal identification number (PIN). You should only provide bank or credit card details after you’ve confirmed the organization’s legitimacy.

7. Shady Tax Preparers

While most tax preparers provide honest and professional services, some operate with less integrity.

Be cautious of “ghost preparers” who might ask you to claim tax credits and benefits you’re not eligible for. They often take a large percentage of your refund or might even steal it entirely. Once they prepare your tax return, they disappear, leaving you to face the consequences.  

Other signs of shady tax preparers include:

  • Encouraging false income or fake deductions to increase your refund
  • Suggesting you deposit your refund into their account
  • Charging fees based on the size of your refund
  • Only accepting cash payments
  • Refusing to sign your tax return or provide their Preparer Tax Identification Number (PTIN)

To select a reputable and qualified tax preparer, use the IRS’s list of federal tax preparers to ensure yours makes the cut.

8. Social Media Schemes

While social media is great for staying connected, it can also be a tool for scammers to lure individuals into tax schemes. Additionally, social media platforms can circulate poor and inaccurate tax advice.

Before acting on tax-related information seen on social media, you should confirm its legitimacy with the IRS or a trusted tax professional. You can also follow the official IRS social media accounts for accurate information and guidance.

9. Spearphishing Attacks

If you’ve ever received a letter from a business or organization you have an account with stating they experienced a data breach, they were likely the victim of a scam known as spearphishing.

This scam involves fraudsters who target specific individuals, organizations, or businesses, typically using malicious emails. They aim to gain access to sensitive systems to commit identity theft and then use this information to file fraudulent tax returns.

The “new client” scam is the most recent spearphishing scheme. In these schemes, bad actors pose as potential clients seeking help with their taxes. They send fake emails to tax professionals to gain access to their computer system and, ultimately, their client information.

The IRS warns individuals, businesses, and organizations to watch for emails that include suspicious requests or links, poor grammar, and unusual word choices. These could be scammers attempting to steal client or customer information.

10. Scams Aimed at High-Income Filers

High-income filers are often targets of schemes designed to reduce taxes. One common scam involves donating art at inflated values to get bigger tax breaks. Others misuse special trusts to avoid taxes on valuable assets and use installment sales to delay taxes indefinitely.

If a tax preparer or third-party representative encourages you to list false income or property information on your tax return, say no and report them to the IRS.  

Remember, taxpayers are legally responsible for the information on their returns, not the tax preparer or third-party representative. Always confirm your information with the IRS or a trusted tax professional before acting on such schemes or requests.

11. Tax Avoidance Strategies

In these scams, fraudsters use various tactics to convince taxpayers they can help reduce or eliminate their taxes.

If a third party reaches out offering to help with your tax obligations, decline their offer. Instead, work directly with a tax preparer or the IRS to ensure your taxes are filed correctly.  

12. Schemes With International Elements

From hiding income in overseas accounts to contributing to foreign individual retirement arrangements, scammers sometimes attempt to convince taxpayers they can avoid U.S. taxes.

Never take part in these types of services or transactions. Rather, seek advice from a trusted professional or the IRS.

How To Report Tax Scams

If you encounter a tax scam at any point throughout the year, you should report it to the IRS so they can investigate.

You can also learn more about common scams and ways to protect yourself in the Connexus Security & Fraud Center.