The IRS has published the most recent in a series of news releases that highlight the top twelve tax-related scams for 2021. This release adds five new entries to this list. All of these scams prey upon people’s natural good will to either manipulate people into doing something illegal or to allow the scammers to take something from people. Here is a quick summary:
The first scam mentioned is when a scammer creates a fake charitable organization, especially after there is a high profile disaster like the recent Surfside Condo collapse, asking you for a charitable contribution to help victims of the disaster, when all you are doing is lining the scammer’s pockets. If you do get a request for a donation, check out the organization on the IRS Tax Exempt Organization Search website to see if it is legit.
Here are some tips from the IRS about fake charity scams:
- Individuals should never let any caller pressure them. A legitimate charity will be happy to get a donation at any time, so there’s no rush. Donors are encouraged to take time to do the research.
- Potential donors should ask the fundraiser for the charity’s exact name, web address and mailing address, so it can be confirmed later. Some dishonest telemarketers use names that sound like large well-known charities to confuse people.
- Be careful how a donation is paid. Donors should not work with charities that ask them to pay by giving numbers from a gift card or by wiring money. That’s how scammers ask people to pay. It’s safest to pay by credit card or check — and only after having done some research on the charity.
The second frequent scam are those targeted at vulnerable populations, especially the elderly and immigrants. This usually involves someone calling and impersonating a government employee, like an IRS or ICE Agent, and threatening fines, revocation of a driver’s license or immigration status, or even jail time, unless the person makes an immediate cash payment. Remember, the IRS like most government agencies, will always contact you in writing by mail and never by phone. Regardless of how threatening (or helpful) they seem, hang up and contact someone your trust.
The third scam mentioned are so-called “Compromise Mills.” These are third parties who promise to settle tax debt for “pennies on the dollar” and end up charging you exorbitant fees for an official sounding compromise that would have cost you much less if you had gone through the IRS directly.
The fourth scam mentioned are unethical or unscrupulous income tax return preparers. These are “ghosts,” who are paid to prepare the return but refuse to sign as a paid preparer and do not have a PTIN, the Preparer Tax Identification Number issued by the IRS. These ghost tax return preparers often require payment in cash only and will not provide a receipt, invent income to qualify their clients for tax credits, claim fake deductions to boost the size of the refund and direct your refunds into their bank account, not yours account.
The fifth scam mentioned is unemployment insurance fraud. The red flags for unemployment fraud include: unemployment payments are coming from a state other than the state in which the customer reportedly resides or has previously worked; multiple state unemployment payments are made within the same disbursement timeframe; unemployment payments are made in the name of a person other than the account holder or in the names of multiple unemployment payment recipients; numerous deposits or electronic funds transfers (EFTs) are made that indicate they are unemployment payments from one or more states to people other than the account holder(s); and, a higher amount of unemployment payments is seen in the same timeframe compared to similar customers and the amount they received.
Unemployment insurance fraud is closely linked to other types of fraud, including:
Identity-related fraud: Filers submit applications for unemployment payments using stolen or fake identification information to perpetrate an account takeover.
Employer-employee collusion fraud: The employee receives unemployment insurance payments while the employer continues to pay the employee reduced, unreported wages.
Misrepresentation of income fraud: An individual returns to work and fails to report the income to continue receiving unemployment insurance payments, or in an effort to receive higher unemployment payments, applicants claim higher wages than they actually earned.
Fictitious employer-employee fraud: Filers falsely claim they work for a legitimate company, or create a fictitious company, and supply fictitious employee and wage records to apply for unemployment insurance payments.
Insider fraud: State employees use credentials to inappropriately access or change unemployment claims, resulting in the approval of unqualified applications, improper payment amounts, or movement of unemployment funds to accounts that are not on the application.
It is embarrassing and humiliating to admit that you have been scammed, but really there is no grounds to do so. Everyone has been targeted, sometimes multiple times, and everyone falls for scams eventually. What is important is to read up on the possible tax-related scams and if you do not avoid being scammed, contacting authorities and financial institutions as quickly as possible to minimize the damage that is done.
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