Common Tax Scams to Be Aware of in 2021

Scammers catch people unaware and rob them of millions of dollars every year. Many behind these scams are well organized and search for easy prey. During times of crisis, like the pandemic, they prey even harder on less suspecting people. In this article, we discuss the top 3 most common tax scams reported in 2020, and the top 3 ways to protect yourself and your loved ones from these predators this 2021 tax season. The IRS urges taxpayers “to be vigilant to these threats during the pandemic and its aftermath,” not only for themselves but for their loved ones as well.

The Top 3 Common Tax Scams of 2020

The top three scams of 2020 are phishing, fake charities, and threatening impersonator phone calls. Scammers use these scams and ones like them to steal money and financial information from taxpayers. The IRS urges “people to watch out for these scams.”

Phishing. Phishing, pronounced fishing, gets its name from scammers throwing out some bait to try and get you on the hook to steal your personal information. Fake emails, texts, letters, and websites are some of the tools most commonly used in these scams. During the pandemic, these phishing schemes are using keywords like “coronavirus,” “Covid-19,” and “stimulus payments” to lure people into taking the bait. It is important to know the IRS will never contact you by email regarding a tax bill, stimulus payment, credit, or refund. Do not click on links claiming to be from the IRS, if they are emailed or texted from someone you do not know or sent from an email claiming to be from the IRS. The IRS will not email or text you, period.

Fake Charities. During times of crisis, the number of fake charity scams rise. Scammers count on exploiting people’s kindness during difficult times to line their pockets. These types of schemes usually begin by scammers making contact either by telephone, text, social media, email, or even in-person. They use several tactics to trick people into thinking they are donating to a legitimate charity, so they can steal their personal financial information. Some even set up fake websites and use names that are like the names used by legitimate charities. Sometimes, they even claim they are working on the behalf of the IRS. If requested, legitimate charities should be willing to provide their employer identification number or EIN. You can search by the charity’s name or EIN on the IRS website here to confirm they are a legitimate charity.

Threatening Impersonator Phone Calls. Scammers use many different tactics on the phone to try and reel in unexpecting people to give up their personal information. One of the most common scams continues to be threatening calls from the IRS. The scammers may threaten arrest, deportation, or license revocation if you do not pay an outstanding, bogus tax bill. Many times, they use a computer system to generate the calls, so they sound more legitimate by requiring you to call back. The IRS confirms on its website, it “will never demand immediate payment, threaten, ask for financial information over the phone, or call about an unexpected refund” or stimulus payment. If you are concerned you may have a legitimate problem with the IRS, contact the IRS directly or your local accountant.

The IRS for the past several years has been publishing every year the “Dirty Dozen” -- a list of the top 12 scams for the year, so taxpayers know to be aware of those schemes. To read about the other scams that made the Dirty Dozen for 2020 and previous years, check out the IRS website here.

Top 3 Ways to Protect Your Loved Ones and Yourself from Common Tax Scams

The best way to avoid phishing, fake charities, and threatening impersonator phone calls is to not take the bait. Pause. Slow down and take a few moments to research the matter.

Talk to a trusted family member or friend. Call the IRS directly. Speak with your local accountant. If you get caught in a rush to make a rash decision, if you are feeling pressured to make a decision right now, the chances are high you are being scammed. Remember, the IRS will never threaten you or demand immediate payment.

To avoid phishing scams, do not mindlessly click links from sources you do not know. If you think the information is legitimate but you are not sure, search for it a different way using your favorite search engine and make sure you find it on a trusted website like IRS.gov.

To avoid fake charity scams, do not feel pressured into immediately donating to a charity. If it is a legitimate charity, they will not threaten or pressure you into donating immediately. They should be willing to give you their employer identification number (EIN) and give you time to think about your decision. Do your research. Use the IRS database here to search to confirm the charity is legitimate. You can search by the charity’s EIN or name. If you cannot confirm they’re a legitimate charity hold onto your financial information.

To avoid threatening impersonator phone calls, do not answer calls or return calls from people you do not know. You probably have that uncle who loves to tell the story and brag about the joke he played on the scammer, but the worst thing you can do is answer or return their call. If you do, it confirms they have a very warm-blooded phish on the line. This means your number just became a lot more valuable. Now, the chances of your number getting added to more scammers’ lists and sold to other scammers just increased drastically. Remember the IRS will never make threatening phone calls or demands for immediate payment. If you are concerned you have a legitimate tax problem, contact the IRS directly or your local accountant for help rather than calling the number the scammers leave.

The Bottom Line

Tax scams tend to increase during tax season and during times of crisis like the pandemic. Stay informed by reading the IRS’ annual “Dirty Dozen” list of the top 12 yearly scams. It is important to know what common tax scams are out there, so you can spot potential scammers more easily and help protect your loved ones and yourself. The easiest way to protect yourself is not to take the bait and stay off the hook. Don’t be a phish!

If you have a legitimate tax problem or think you are being scammed, schedule an appointment today with the accounting and tax preparation professionals at Gudorf Tax Group. They can review and advise you regarding your situation and help you set up a payment plan with the IRS if needed.

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