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IRS: Beware the 'Dirty Dozen' Tax Scams

WealthUp - Sat Mar 2, 6:00AM CST

You get an email or a text from someone saying they're with the IRS. They tell you "you are to update your IRS e-file immediately" and direct you to click on a link they say will allow you to access your IRS account.

But it's not from the IRS, and that link goes somewhere else. It's all a scam. And it's just one of many tax-related frauds that could be coming your way sometime during the remaining tax filing season … or even well past April 15.

The Tea

People who like swindling other people love nothing more than an urgent, consequential matter. You know: Something big, important, and timely they can use to incite a person's panic or confusion, or appeal to their greed, in hopes of tricking that person into coughing up their money and personal information.

So naturally, these people love tax season.

The annual process of filing your taxes comes with big potential consequences and big potential rewards. Per the former, most people are aware that cheating the IRS can result in penalties, interest, and even jail time—plenty of motivation for a person to panic if they think the tax man is after them. Per the latter, many people look toward their annual tax refund almost like a regular bonus—so it's easy to see the appeal of someone promising a fatter check.

All of this spells opportunity for scam artists and fraudsters, who managed to siphon some $5.7 billion from U.S. taxpayers in 2022 alone (the last year for which the IRS has this data).

If we had to guess, you wouldn't want to contribute to the billions more that will be cheated out of Americans in 2024. Well, you can start by learning about these scams—as well as the recommended ways of avoiding them.

And if you're thinking to yourself "I'm too smart to fall for a scam," think again.

Oh, you're probably smart. But as we pointed out in our rundown of popular elderly scams, scams aren't about intelligence—they're about using emotions to neutralize your intelligence. Unfortunately, most people are more vulnerable to emotional tactics than they'd like to realize, so the best thing you can do is always take these threats seriously and learn how to sniff them out in the moment.

The Take

Today, we're going to focus on some of the most common scams included in the IRS's "Dirty Dozen"—a list of 12 tax scams that America's tax agency believes most people should be on high alert for in a given year. You can check out our full breakdown of all 12 Dirty Dozen tax scams on our site. But for now, let's take a look at a few of the most prominent scams that target just about everyone.

Phishing/Smishing

Phishing and smishing scams are modern-day digital traps set by criminals. Scammers pretend to be from reputable sources in the tax and financial world, sometimes even masquerading as the IRS or state tax agencies. They use "social engineering" to get your personal information, which they can then use to steal your money or engage in identity theft.

WealthUp Tip: Most of us need to file a tax return … but not all of us. Here's how to know whether you need to file taxes this year.

The scheme is pretty simple. A scammer, pretending to be the IRS or some other official entity, sends you an unexpected email (phishing) or text (smishing) telling you that you need to do something—they might ask you to directly reveal personal or financial information, or they might ask you to click on a fake link that either sends you somewhere you'll share that info or downloads malware that can extract it from you. Point is, once they have this data, they're a step closer to committing identity theft.

How do I avoid this scam? First and foremost, by knowing that the IRS almost always contacts taxpayers via regular mail. The IRS will never attempt to contact you through other means "unless you specifically asked them for a callback to answer your tax question," says Jeff Sakasegawa, Trust & Safety leader for identification verification solutions provider Persona. "If the IRS calls, texts or emails you, it's not the IRS. Any call or text out of the blue from the IRS is fake."

These scams are particularly insidious because they wear the mask of legitimacy. Stay vigilant and think twice before responding to or sharing information with unknown or unexpected digital correspondences. Also, read up on common cybersecurity best practices that can help you better identify and fend off these attacks. Your caution and knowledge are powerful shields against these digital predators.

Tax Advice From Social Media

Relying on tax advice from social media can be misleading and potentially hazardous to you. The IRS warns that social media platforms can circulate inaccurate or fraudulent tax information, leading honest taxpayers into compromising situations. 

We've already seen a lot of this firsthand, and we expect it to get worse the closer we get to the April 15 tax filing deadline.

These scams might not necessarily be attempting to solicit money from you by scammers. But the advice given can be shady—and even make you unwittingly become a scammer yourself. Some previous poor advice highlighted by the IRS might suggest submitting false information on forms like W-2s for unjust refunds or misuse of specialized forms like Form 8944, intended for tax professionals, not the general public.

How do I avoid this scam? The easiest solution to this problem is to avoid taking any financial advice from social media and exhibiting self-restraint from acting on it. 

If you do come across something on social media that you think might apply to you, turn to trusted sources such as tax professionals, reputable tax software, and IRS.gov to learn more. These should always be your first choice for tax guidance.

Fake Charities

Many people know that if they itemize their taxes, they can claim a deduction for charitable giving on their federal tax return.

Unless, of course, they happen to give their money to a fraudster instead.

WealthUp Tip: Worried about the potentially high cost of tax prep? Here are eight free tax filing options for 2024.

Scammers set up fake charities during times of crisis or disaster, when goodwill spikes and donations are most likely to pour in. They either mimic the names and branding of legitimate charities, or make up charities, to solicit donations via phone, email, or in person. These fraudulent operations often request donations in cash or via wire transfers, offering limited or no verification information about their organization.

Not only do they pocket the funds—stealing from you and diverting resources away from genuine charitable efforts—they sometimes also use the opportunity to capture personal information, which can lead to tax-related identity theft. And you can forget that deduction, too. The IRS says "charitable donations only count if they go to a qualified tax-exempt organization recognized by the IRS."

How do I avoid this scam? Fake charities may use many different methods to solicit donations. A few things to watch out for?

  • Urgency/pressure: Like with many scams, fake-charity fraudsters will try to rush you into an immediate payment. But a legitimate charity will be happy to get a donation at any time.
  • Close-but-not-exact charity names:Scammers frequently use names that sound like well-known charities to confuse people—the American Diabetes Association is real, so a scammer might say they're from the Association of Diabetic Americans. Potential donors should ask the fundraiser for the charity's exact name, website and mailing address so they can independently confirm it. You can check a charity's identity at sites such as Charity Navigator, which provides information on legitimate charities, or online state databases.
  • Be wary about how a donation is requested. Taxpayers should never work with charities that ask for donations by giving numbers from a gift card or by wiring money. That's a scam. It's safest to pay by credit card or check—and only after verifying the charity is real. In fact, if someone claims to be from a legitimate organization and asks for a legitimate payment method, but you're still not comfortable, you can always go directly to the charity's official website and pay that way.
  • Don't give more than needed. Scammers are on the hunt for both money and personal information. Taxpayers should treat personal information like cash and not hand it out to just anyone. They should never give out Social Security numbers, credit card numbers or PIN numbers, and they should give bank or credit card numbers only after they've confirmed the charity is real.

Again, you can check out our full breakdown of the 12 Dirty Dozen tax scams on our site to learn about the other threats you might face, and how to fend them off.

Past that, though, just remember to keep a watchful eye; don't immediately react to any emails, texts, or phone calls from people purporting to be with the IRS or another tax agency; and protect your personal information like you would anywhere else.

That's all for today! Have a great weekend!

Riley & Kyle

WealthUp (Young and the Invested is now WealthUp)

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On the date of publication, Kyle Woodley did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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