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Checklist 222: Avoiding Tax Scams with Nick Leon

March 11, 2021

On this podcast, we talk about avoiding tax scams both new and old. We cover “classic” tax scams as well as 2021 tax scams.

Checklist 222: Avoiding Tax Scams with Nick Leon

Tax time is here … and so are the scams. Avoiding tax scams can be tricky, so on this episode of the Checklist, we’ll cover:

All your old favorites

Before we move on to 2021 tax scams, let’s take a moment to review four “classic” tax scams that tend to reappear every year:

  1. The IRS Phone Scam

    Scammers call taxpayers saying they’re from the IRS. They then try to get money or sensitive data from their victims. To do this, they’ll tell people that they owe back taxes, or that they’re going to receive a tax refund, but need to supply some additional personal information to get it. In more intimidating versions of the scam, they’ll threaten their targets with jail time, deportation, or the loss of a driver’s license or Social Security number.

    The lies vary, but there is one consistent factor in the IRS phone scam that makes it very easy to spot: the phone call itself. The IRS never calls taxpayers out of the blue asking for personal information, and doesn’t handle delinquent taxes or tax audits with threatening phone calls. If anyone calls you claiming to be from the IRS, you can safely assume it’s a scam and just hang up the phone.

  2. Phishing Emails

    Much like other forms of phishing, tax-related phishing emails arrive unsolicited. Usually they will claim to be someone from the IRS who wants to help you e-file your taxes, or to help you get your refund. The IRS says that common subject headings on these emails include things like “Automatic Income Tax Reminder” and “Electronic Tax Return Reminder”. The emails often contain fake temporary passwords and links to a fraudulent website designed to look like the real IRS website. Visiting one of these sites can lead to stolen personal data or a malware infection.

    As with phone scams, the real giveaway here is that the IRS just doesn’t initiate contact with taxpayers in this way. If you get a random email from someone who says they’re with the IRS, don’t click on any links in the email, and don’t download any attachments. Report the email to and then delete it.

  3. The TAS Scam

    Scammers call taxpayers claiming to be from the Taxpayer Advocate Service (TAS), a division of the IRS that was formed to help taxpayers. They sometimes use caller ID spoofing to make the calls appear to originate from an actual TAS regional office. If a target answers the call (or returns the pre-recorded “robocall”), the scammers will try to convince them to give out sensitive personal data such as a Social Security number or Individual Taxpayer Identification Number.

    Here’s how to spot these scams: The TAS is real, but they don’t randomly reach out to taxpayers looking to help them. In other words, if you haven’t contacted the TAS first, then they aren’t going to call you — and anyone who does call you saying they’re from the TAS is a scammer. Hang up the phone and don’t engage such callers.

  4. Ghost Tax Preparers

    Ghost tax preparers are consumer fraudsters. They pretend to be legitimate tax prep professionals, but their goal is to abscond with tax preparation fees or, in some cases, to steal people’s tax refunds. Sometimes, ghost preparers will agree to work for a percentage of the total tax refund they get for the taxpayer — and will misrepresent a victim’s tax liability to the IRS in order to artificially inflate their commission!

    Ghost tax preparers can be spotted by their refusal to adhere to the norms and rules followed by legitimate tax preparers. If they refuse to sign your tax return with their official (and legally required) Preparer Tax Identification Number (PTIN), you’re almost certainly dealing with a scammer. Whatever you do, don’t sign that return and mail it in yourself, which is typically what they’ll ask you to do in order to avoid having to use a PTIN. Watch out for other signs of fraud as well, such as preparers who won’t give you a receipt, or who insist on cash payments. And if you’re getting a refund via direct deposit, always double-check your tax return before it’s filed to make sure the account info is correct — some unscrupulous tax preparers swap out their bank details for their customers’, stealing their refunds!

Tax scams for 2021

Last year was unprecedented, to say the least, and this means that the 2021 tax season is producing some nasty surprises for taxpayers. Here are 4 newer tax scams that you should be aware of in the coming weeks:

  1. Fraudulent Refunds

    In some cases, scammers steal enough personal info from tax preparers to file incorrect tax returns for people. This results in an unexpected or excessive refund check or deposit. The scammers will then call their targets pretending to be from the IRS, and tell them that a “mistake” has been made and that the taxpayer needs to return the money immediately. If a victim believes the scammer and “returns” the erroneous refund, that money goes to the scammers, not to the IRS. But the government, of course, will still want to know why you filed an incorrect tax return — and they’ll want their money back too!

    If you get an unexpected or excessively large tax return, a scammer may have filed your taxes on your behalf — which is another way of saying identity theft. Go to the IRS website and look up the process for handling tax-related identity theft. If anyone calls you about the “error”, don’t talk to them or give them any information — it’s just the scammers looking to implement “phase 2” of their plan. Instead, go through official IRS channels to file an amended tax return and to send the money back.

  2. Bogus Unemployment Claims

    Lots of people were out of work last year due to COVID-19, and the scammers knew this. Scammers being scammers, they filed lots of fake unemployment claims using people’s stolen personal data. But now it’s tax time, and unemployment benefits need to be reported on tax returns with IRS Form 1099-G. Some taxpayers have received a 1099-G — even though they never filed for or received unemployment benefits!

    If you get an unexpected 1099-G, don’t ignore it: Someone may have made an unemployment benefits claim in your name, and the IRS doesn’t know that it wasn’t you! You need to contact the state agency that issued the 1099-G and tell them what happened. They’ll be able to help you obtain a corrected 1099-G that shows you never received any benefits.

  3. Fake Debt Relief

    Lots of people are going through tough financial times right now, and that includes people who are behind on their taxes. Unfortunately, scammers are trying to take advantage of that by reaching out to people and telling them about “offer-in-compromise” (OIC) deals with the IRS. OIC is a way for delinquent taxpayers to settle their tax debt for a fraction of what they actually owe. OIC deals are legitimate, but they’re extremely rare: Most people won’t qualify for them. Predatory debt relief firms who contact delinquent taxpayers talking about OIC are at best making promises they can’t keep, and at worst, using the lure of an OIC settlement to steal people’s personal data or charge them excessive service fees.

    If you’re having tax issues, the best thing to do is to ignore anyone who reaches out to you directly telling you that you can settle your tax debt for “pennies on the dollar”. Instead, contact a reputable, licensed financial planner, tax attorney, or accountant. They’ll give you the help and advice you need, and let you know what your best course of action is.

  4. Recovery Rebate Tax Scams

    Last year, there were tons of scams around the COVID-19 relief packages, and now that it’s tax season, the scammers may have one last trick up their sleeves. People who never got their stimulus funds, or who got the wrong amount, may be approached by scammers offering to help them recover their relief payments. Such offers of “help” are not legitimate: Scammers use the issue of missing stimulus funds to trick people into giving them personal data or money.

    If someone reaches out to you about COVID-19 relief, don’t listen to them, give them any information, or send them any money. If you really need to recover stimulus funds that you never received, or if you need to correct an underpayment, you have to claim the Recovery Rebate Credit on your taxes this year (if you’re eligible). If you file your own taxes, you can look up “Recovery Rebate Credit” on the IRS website for more details, or you can ask the support team for your tax prep software if you’re e-filing. If someone else is doing your taxes for you, it’s even easier: Just ask your licensed tax preparer about it, and they’ll let you know if you qualify for the credit, and what you have to do.

Is there a topic you’d like to see covered on a future Checklist? Go ahead and drop us a line to tell us about it! For past episodes (both audio and show notes), check out the Checklist archives.

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