Each year, the IRS releases a list of 12 common tax scams to raise awareness and to offer resources so taxpayers can better protect themselves against this type of crime. As a result of the COVID-19 pandemic and its impact on tax regulation, there has been a rise in the number of schemes related to coronavirus tax relief. The IRS is urging all taxpayers to be watchful, so they do not fall prey to these fraudulent schemes. Below are three pandemic-related scams that have seen an uptick this past year, and some things taxpayers can do to avoid them.
Fake Charities
Fake charitable organizations are certainly not a new avenue for criminals to exploit, but the pandemic and related relief efforts have triggered a surge in this type of fraudulent scheme.
What to watch for:
Criminals will usually contact taxpayers by phone or email, soliciting donations and personal information for illegitimate charities. Some may even claim to be calling on behalf of the IRS to help victims file casualty loss claims. These charities may purport to offer assistance for nationally declared disasters, such as the COVID-19 pandemic, but are nothing more than a scheme to steal personal information.
What to do:
It is important for taxpayers to be cautious of solicitors asking for donations and to exercise due diligence by obtaining some background information on the charity. Legitimate charitable organizations will provide their Federal Employer Identification Number, which can be used as a tool to confirm the validity of the charity.
Unemployment Fraud
The surge in nationwide unemployment, a direct result of the impact the pandemic had on the job market, created a parallel rise in fraudulent unemployment compensation claims.
What to watch for:
Scammers will attempt to steal personal information to file fraudulent unemployment claims and then collect the payments for themselves.
What to do:
Taxpayers should contact their state agency if they received a Form 1099-G reporting unemployment compensation they did not file to receive. They will then receive a corrected form. Taxpayers should only claim the compensation they received on their individual tax return
Economic Impact Payment Theft
The economic stimulus payments issued to taxpayers to provide pandemic-related relief are a common target for scammers.
What to watch for:
Often, scammers will attempt to steal personal information, sending suspicious site links requesting that taxpayers confirm personal data. Most eligible taxpayers should receive stimulus payments automatically, so be wary of any attempt to gather your personal information as it relates to this form of economic relief.
What to do:
The importance in exercising diligence around any request for personal information is paramount. If a request for information looks suspicious, some investigation is likely warranted. Remember, the IRS will not contact taxpayers via text, email, or social media requesting personal information related to the economic impact payment.
Steps the IRS Is Taking Toward Prevention
The IRS offers some measures that help protect taxpayers from these common tax scams. Specifically, the Identity Protection Personal Identification Number (PIN) was made available this year to ALL taxpayers—not just those who were previously victims of identity theft. This unique PIN prevents scammers from filing fraudulent returns using stolen personal information. Taxpayers can voluntarily choose to participate in the IP PIN Opt-In Program. They must first have an account on IRS.gov to register and validate their identity.
The IRS has also focused on other measures to reduce fraud, including implementing multi-factor authentication requirements for tax software platforms, asking state agencies to require driver’s license numbers as proof of identity, and masking personal information from tax transcripts.
As we continue to navigate the reality of the pandemic, we will see a rise in the number of tax-related scams, so it is more important than ever to take preventive and precautionary measures to minimize your risk of falling victim to these fraudulent schemes.
If you have any questions about protecting yourself from tax scams or need additional guidance related to pandemic relief, visit PYA’s COVID-19 hub, or contact a PYA executive below at (800) 270-9629.
