Tax Scams: The Pandemic Edition
The IRS has published its annual list of "dirty dozen" tax scams. They do this every year, but 2020 is special, as the scammers have managed to turn the pandemic to their advantage.
Phishing: Don't make assumptions
Phishing — fake emails looking to steal personal information — has been around for years. Whether you run a small business getting some kind of government assistance or are a laid-off employee waiting for unemployment payments, you need to be alert to emails with keywords such as "coronavirus," "COVID-19" and "stimulus." Be wary: They may be nothing more than scams to steal personal information. Do they contain a legitimate address? Remember: The IRS will never initiate contact with taxpayers via email about a tax bill, refund or Economic Impact Payment. Don't click on links claiming to be from the IRS. Protect yourself by reading IR-2020-115, IRS warns against COVID-19 fraud; other financial schemes.
Criminals frequently set up fake charities to steal from well-intentioned people trying to help in times of need. Bogus websites use names similar to legitimate charities to trick people into sending money or providing personal financial information. Be wary. Legitimate charities will provide their employer identification number, if requested. Taxpayers can find legitimate and qualified charities with the search tool on IRS.gov. Newspapers often have lists of legitimate charities in the wake of a disaster or ongoing problem.
Economic Impact Payment or refund theft
This year, criminals also turned their attention to stealing EIPs as provided by the CARES Act. They may try to file false tax returns or supply other fake information to the IRS to divert refunds to wrong addresses or bank accounts. The IRS has warned nursing homes and other care facilities that EIPs generally belong to the recipients, not the organizations providing the care. There have been concerns that people and businesses may be taking advantage of vulnerable populations who received the payments. The IRS has also advised that these payments do not count as a resource for determining eligibility for Medicaid and other federal programs, nor do they count as income in determining eligibility for these programs. See IR-2020-121, IRS alert: Economic Impact Payments belong to recipient, not nursing homes or care facilities for more information.
Offer in Compromise mills
With their finances in disarray, many people are worried about their tax situation. Preying on them are so-called debt resolution companies that can exaggerate chances to settle tax debts for "pennies on the dollar" through an Offer in Compromise. Although OICs are legitimate IRS arrangements, they are aimed at taxpayers who meet very specific criteria under law to qualify for reducing their tax bill. But unscrupulous companies oversell the program to unqualified candidates so they can collect a hefty fee from taxpayers already struggling with debt. If you are concerned about your ability to pay taxes, you don't need one of these dubious companies to help you.
If you have questions about OICs or any of the other situations on this list, give us a call before following up with any company or individual reaching out to you. Meanwhile, you can read the full "dirty dozen" list on the IRS site.