IRS Annual List of Tax Scams –Taxpayers Beware in 2022!
Compiled annually for more than 20 years, the Dirty Dozen lists a variety of common scams that taxpayers can encounter anytime. The IRS identifies problematic transactions through taxpayer examinations, promoter investigations, whistleblower claims, data analytics, document matching, and marketing material review.
The objective of the agency is to raise awareness of threats by fraudsters to steal money and personal information from honest taxpayers.
The IRS warns taxpayers to be aware of these scams aimed at fleecing innocent victims. This year’s list is divided into five groups outlined below. The IRS reminds taxpayers to watch out for and avoid advertised schemes, many of which are now promoted online, that promise tax savings that are too good to be true and will cause taxpayers to legally compromise themselves.
“Taxpayers should stop and think twice before including these questionable arrangements on their tax returns,” said IRS Commissioner Chuck Rettig. “Taxpayers are legally responsible for what’s on their return, not a promoter making promises and charging high fees. Taxpayers can help stop these arrangements by relying on reputable tax professionals they know they can trust.”
Note: The following is not intended as a complete description of each scam … just a heads-up to alert taxpayers when solicited to engage in certain tax avoidance schemes. Click here for in-depth detail.
1) Potentially Abusive Relationships
The 2022 Dirty Dozen begins with four abusive transactions that involve charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance, and monetized installment sales.
- Use of Charitable Remainder Annuity Trust (CRAT) to Eliminate Taxable Gain.
- Maltese (or Other Foreign) Pension Arrangements Misusing Treaty.
- Puerto Rican and Other Foreign Captive Insurance.
- Monetized Installment Sales.
2) Pandemic-related Scams
Taxpayers are still at risk from criminals who continue to use the COVID-19 pandemic to steal people’s money. Taxpayers should be alert to potential fake emails, phone calls or texts seeking your personal information. Note: The IRS will never initiate contact with taxpayers via email about a tax bill or refund.
Likely alerts to scams:
- Tax refund frauds;
- Unemployment fraud resulting in inaccurate filing of 1099-G forms
- Fake employment offers
- Fake charities seeking contributions.
3) Offer In-compromise “Mills”
Offer in Compromise or OIC “mills,” typically appear in local advertising heralding how they can settle a person’s tax debt for a fraction of what’s owed … for a fee of course. Often, the reality is that taxpayers could have worked directly with the IRS at no additional cost.
4) Suspicious Communications
Suspicious communications are crafted to trick or scare the recipient to respond before thinking … referred to as “phishing”. Phishing is the fraudulent practice of sending communications purporting to be from reputable companies to induce individuals to reveal sensitive personal financial information, money, passwords, Social Security numbers and more. The fraudsters’ intent is to use this information to file false tax returns and tap into financial accounts, among other schemes.
Four common phishing communication vehicles are:
- emails
- social media posts
- phone calls
- text messages
5) Spear Phishing Attacks
Spear phishing frauds are known to target specific individuals as well as distinct groups. As described in 4) above, the bad guys’ intent is to steal taxpayer data and identities to file fraudulent tax returns for refunds. Virtually any type of business or organization may be subject to a tailored spear phishing attack. Again, be highly skeptical of communications requesting your financial or personal information.
Take a look at this report of a recent spear phishing email sent to tax preparers. The IRS logo was prominently displayed along with a variety of subject lines such as “Action Required: Your account has now been put on hold”. The objective of the communication was to steal tax professionals’ software preparation credentials. Unwary recipients who clicked on a link were sent to a website requesting the tax preparer’s account credentials thus revealing sensitive client information.
If any of the foregoing seems unclear as to how it applies to your specific circumstances, please keep in mind that Pearson & Co. will help.
Give us a call or drop an email. We’ll respond immediately.
