IRS 2023 Dirty Dozen Scams: What You Need to Know

Dirty Dozen List 

As taxpayers prepare to file their returns this year, the IRS has again issued its annual “Dirty Dozen” list of the most common tax scams. These scams can range from simple phishing attempts to sophisticated schemes aimed at high-income filers and businesses. 

“Scammers are coming up with new ways all the time to try to steal information from taxpayers,” said IRS Commissioner Danny Werfel. “People should be wary and avoid sharing sensitive personal data over the phone, email or social media to avoid getting caught up in these scams. And people should always remember to be wary if a tax deal sounds too good to be true.”

In this blog post, we’ll dive into the details of the Dirty Dozen Tax Scams of 2023 and provide you with the information you need to protect yourself and your finances.

Employee Retention Credit Claims

Are you considering applying for the Employee Retention Credit? Recent IRS warnings reveal that there has been a surge in internet and radio advertisements offering large refunds related to the ERC. However, many of these promotions are based on inaccurate information. The IRS has taken steps to enforce guidelines on who can claim the credit and how, and businesses are urged to be diligent when applying for the ERC. Therefore, it is essential for taxpayers to avoid providing their personally identifiable information to these scammers.

Phishing & Smishing

Phishing and smishing scams are increasingly common as criminals try to trick taxpayers into providing valuable personal and financial information. These scams are often disguised as legitimate communications from the IRS or state tax agencies. They usually offer fake refunds or threaten tax fraud charges to scare victims into giving up their information. It’s important to remember that the IRS will never initiate contact through email or text regarding a tax bill or refund. 

Online Account Help

Beware of scammers who offer to “help” set up your IRS Online Account. These fraudsters pose as a helpful third party and offer their assistance, but in reality, they are trying to steal your personal information. The IRS urges taxpayers to establish their own online account through IRS.gov, where you can access your tax information without risking personal information falling into the wrong hands. If you do need help setting up an account, consult with a trusted tax professional. 

False Fuel Tax Credit Claims

Taxpayers should be aware of false fuel tax credit claims that some tax preparers and promoters use to inflate refunds while charging high fees. Tax credits associated with Form 4136 are intended for off-highway business and farming use and are not available to most taxpayers. Unfortunately, some unscrupulous individuals are convincing taxpayers to falsely claim these credits, even though they are not eligible, putting them at risk of penalties and interest charges. 

Fake Charities

Fake charity scams are a real problem. Scammers often create fake charities in the wake of natural disasters or other major events, hoping to steal money and personal information from unsuspecting donors. To avoid falling victim to these scams, it’s important to do your research and verify the charity’s authenticity.

Unscrupulous Tax Return Preparers

Choosing a trustworthy tax preparer is essential. Red flags include charging fees based on the size of your refund, claiming false deductions, inflating your return, and asking you to sign incomplete forms. Always check the credentials of your tax preparer and make sure they have an IRS Preparer Tax Identification Number (PTIN). And remember, you are responsible for all the information on your tax return, so don’t hesitate to ask questions.

Social Media Pitfalls

Social media has become a hub for scams and bad advice. Misleading and fraudulent tax information can be found on every social platform, like encouraging taxpayers to submit false information in hopes of getting a bigger refund. There has also been an abundance of misleading statements regarding W-2 forms this year. Taxpayers should be cautious, do their research, and seek professional advice.

Spearphishing Attacks

We already touched on phishing here–but spearphishing is an even more targeted attack aimed at stealing sensitive information. These scammers are looking for information such as usernames, passwords, and financial information. The IRS warns both taxpayers and tax preppers to look out for messages disguised as something from a trusted source. 

OIC Mills

Taxpayers facing tax debts and hardship should be cautious of Offers in Compromise (OIC) mills, which claim to settle their tax bills for pennies on the dollar. These mills often charge exorbitant fees for services that taxpayers can obtain by contacting the IRS directly. To check eligibility, taxpayers can use the IRS Offer in Compromise Pre-Qualifier tool. 

High-Income Filer Schemes

High-income filer scams target wealthy taxpayers by promoting tax schemes that involve misapplying tax rules. One example of such a scam involves the use of a Charitable Remainder Annuity Trust (CRAT), which can eliminate taxable gain by transferring, instead of selling, appreciated property to a CRAT. Scammers also encourage taxpayers to claim the use of a monetized installment sale in exchange for a fee, which improperly delays the recognition of gain on appreciated property. It’s important to be wary of these schemes and to seek advice from reputable professionals to avoid being caught up in a tax scam.

Bogus Tax Avoidance Strategies

The IRS is calling attention to two fraudulent tax avoidance strategies this year. The first is illegitimate micro-captive insurance arrangements, and the other is syndicated conservation easements. 

“These tax avoidance strategies often target high-income individuals seeking to reduce or eliminate their tax obligation,” said IRS Commissioner Danny Werfel. “Sometimes taxpayers are conned into believing they can participate in these schemes. People should always look for advice from an independent, trusted tax professional, not a promoter focused on aggressively marketing and pushing questionable transactions.”

International Tax Scams

International tax compliance remains a high priority for the IRS. Taxpayers are generally taxed on their worldwide income and hiding money in offshore accounts and concealing digital assets are illegal. The IRS warns against attempting to evade taxes by making contributions to individual retirement arrangements in foreign countries, particularly Malta. The IRS is also closely monitoring US companies claiming deductions for the cost of “insurance coverage” with foreign corporations. 

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Wilke CPAs & Advisors is ready to help small business owners achieve their tax goals. Contact us when you’re prepared to discuss your unique tax situation.