Every year, the IRS releases a list of the top scams and schemes taxpayers need to watch out for, known as the “Dirty Dozen.” Here’s a breakdown of the 2024 list and tips to stay ahead of these threats:
1. Phishing and Smishing Scams
Emails or text messages claiming to be from the IRS are on the rise, often promising fake refunds or threatening false “tax due” notices. Remember: the IRS will never email or text you. Avoid clicking links or responding to these messages.
2. Employee Retention Credit (ERC) Fraud
If you’re a business owner, you’ve likely heard ads or received calls promoting the Employee Retention Credit. However, the IRS has halted processing new claims after September 14, 2023, and is looking into questionable and/or fraudulent claims. Be cautious of aggressive promoters and consult a trusted tax professional before filing.
3. “Helpful” Scammers
If you’re setting up an online IRS account, beware of scammers offering to “help.” These individuals often steal sensitive tax information to file fraudulent returns and claim refunds in your name.
4. Fuel Tax Credit
The fuel tax credit is intended only for specific off-highway business or farming uses. Filing a false claim could put you under IRS scrutiny, so ensure you qualify before claiming this credit.
5. Offer in Compromise “Mills”
Some companies promise to erase your tax debt through the Offer in Compromise (OIC) program—for a hefty fee. Unfortunately, these promises are often empty, and you may end up paying for no actual assistance.
6. Fake Charities
Scammers will establish these fake charities to exploit taxpayers’ generosity, especially during disasters. Only donations to IRS-recognized tax-exempt organizations are deductible. If you are not sure if it is an IRS-recognized tax-exempt organization, you can use the IRS’s Tax-Exempt Organization Search (TEOS) tool to verify.
7. Ghost Preparers
Be cautious when choosing a tax preparer. Some tax preparers engage in fraud, identity theft, and other scams, so be sure to identify your preparer’s credentials and qualifications.
8. Tax Advice on Social Media
Beware of tax tips circulating on social media. Many “trends” are scams or spread misleading information.
9. Spearfishing Attacks
Tax preparers are also being targeted with spearphishing attacks, where scammers pose as new clients seeking tax advice. Once engaged, they send harmful attachments or links to try to steal other client’s data.
10. High-Income Filers and Illegal Tax Schemes
High-income filers are being scrutinized for schemes like false art donation valuations or misrepresentation of capital gains and basis adjustments in charitable remainder trusts (CRATs).
Learn about more illegal tax schemes the IRS is on the lookout for.
11. Tax Avoidance Strategies
Some schemes, like syndicated conservation easements or micro-captive insurance, claim to help you avoid taxes. However, they often come under IRS investigation and could lead to hefty penalties.
12. International Tax Avoidance Schemes
International schemes involving Maltese retirement arrangements or digital assets like cryptocurrency are growing. Remember, the IRS tracks digital asset transactions worldwide. Stay informed and file accurately.
Staying informed about these scams and schemes is your best defense. The IRS’s “Dirty Dozen” list is a reminder that while tax season can be stressful, knowledge is power. By understanding the tactics used by fraudsters and staying vigilant, you can protect yourself and your finances. Tax season doesn’t have to be a source of anxiety—stay proactive, verify information from reliable sources, and approach your tax obligations with confidence.
