Around the end of every tax season, the IRS publishes its annual “Dirty Dozen” list of common tax-related scams and abuses that unsuspecting taxpayers might encounter. Although it is not a formal notice of agency enforcement priorities, the Dirty Dozen list is a useful reminder of the many devious schemes fraudsters have concocted to gain access to taxpayers’ money or personal information, or to promote abusive tax-saving plans.

As you might expect in today’s digital economy, identity theft and related cybersecurity risks figure prominently in several of this year’s Dirty Dozen schemes.

1. Phishing and smishing scams. Fraudsters frequently send a barrage of unsolicited emails (phishing) and texts (smishing) claiming to come from the IRS. Some offer phony tax refunds while others threaten legal action, but all of these messages are scams designed to obtain confidential personal information. The IRS will never use email, text, or social media to alert taxpayers about a tax bill or refund.
2. Questionable Employee Retention Credit (ERC) claims. Although the IRS moratorium on processing new ERC claims is still in effect, aggressive promoters continue to push businesses to file questionable claims in exchange for a percentage of the promised refund. Always rely on your established tax professional to help you handle any ERC issues.
3. Third-party IRS Online Account scams. An IRS Online Account provides taxpayers with convenient access to their tax information. Scammers often offer to help taxpayers set up these accounts, but their real goal is simply to gain access to sensitive personal information. Setting up an IRS Online Account is relatively simple and seldom requires third-party assistance.
4. False Fuel Tax Credit claims. The federal Fuel Tax Credit is available only for off-highway business and farming use, but unscrupulous promoters often mislead ineligible businesses into filing false claims using fictitious documents or receipts—all while charging taxpayers inflated fees.
5. Offer in compromise (OIC) “mills.” The OIC is a legitimate IRS program to help taxpayers settle large federal tax debts, but OIC mills make exaggerated promises about helping taxpayers settle their debt for just pennies on the dollar. In reality, these mills often charge excessive fees, and taxpayers end up paying exorbitantly for a service they could have obtained directly from the IRS or through their regular tax professional.
6. Fake charities. Scammers frequently use natural disasters or other events to prey on well-meaning taxpayers. Not only do they obtain taxpayers’ money, but they also gather sensitive personal and financial information they can then exploit through identity theft. The IRS urges donors to use its Tax-Exempt Organization Search tool (https://www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations) to verify a charity’s legitimacy.
7. Untrustworthy “ghost” tax preparers. A common problem every tax season, unethical “ghost” tax preparers urge taxpayers to apply for credits or other benefits for which they don’t qualify, often charging a large percentage fee or even stealing the entire refund in the process. Ghost preparers do not sign the tax returns they prepare or provide a valid preparer tax identification number, whereas a legitimate tax preparer always does, and renews the number every year.
8. Bad social media tax advice. Social media platforms routinely circulate wildly inaccurate tax information, urging people to misuse common tax documents or submit false information to get large refunds. Sometimes identity thieves are behind these schemes; in other cases, they come from influencers trying to gain attention and clicks. Always verify any social media tax advice you hear with a trusted tax professional—or better still, just ignore it altogether.
9. “Spearphishing” and phony new client scams. The IRS reminds tax professionals that they too can be targeted by identity thieves. This often happens through spearphishing attempts in which scammers pose as potential clients, using fake emails to try to access their computer systems. While most tax pros are trained to be cautious and recognize the warning signs of such attacks, this serves as a good reminder to stay alert.
10. Scams aimed at high-income filers. Taxpayers with high incomes are always tempting targets. This year the IRS warns about three specific tax traps: 1) inflated deductions for donating art, 2) improper use of charitable remainder annuity trusts, and 3) monetized installment sales that improperly delay gain recognition on appreciated property. All three of these can be used as legitimate tax planning strategies, but promoters use overly aggressive approaches or misapply the rules, which can lead to costly penalties.
11. Bogus tax avoidance strategies. Out of the many bogus tax strategies that unscrupulous promoters come up with, the IRS has singled out two for special mention: improper use of syndicated conservation easements and micro-captive insurance arrangements. As with most other tax scams, both of these abuses begin with legitimate provisions of the tax code but then misapply and exploit them while generating high fees for their promoters.
12. Schemes involving international elements. The final category on this year’s Dirty Dozen list involves schemes with international components, such as setting up individual retirement accounts in Malta or certain other countries, and then claiming the income generated is tax-free under various tax treaties. Other schemes involve concealing money or digital assets in foreign accounts where promoters falsely claim they are untraceable or outside the jurisdiction of the IRS.

Whenever you encounter a suspicious tax strategy or any tax advice that sounds too good to be true, your first call should be to your trusted tax professional. You can find more information about this year’s Dirty Dozen list on the IRS website at https://www.irs.gov/newsroom/dirty-dozen. We are also here to help. Reach out to Holbrook & Manter for help with this and other tax-related matters.