Tax Scam Update: Meet the “Dirty Dozen” for 2023

Each year, the Internal Revenue Service releases its “Dirty Dozen” list of the most rampant tax scams. These schemes affect both individuals and corporations, and are relevant not only during tax preparation, but throughout the rest of the year.

For 2023, the twelve topics vary widely, but most fall into two categories:

• Fraudulent attempts at data mining. These can be targeted at individuals (for personal tax and financial data) and companies (to create vulnerabilities in data storage).
• Fraudulent preparation assistance that leads to submitted, but inaccurate, tax returns.

Fraudulent attempts at data mining
For these scams, the goal is to directly steal information about individual taxpayers (identity theft) or companies involved in tax preparation. Prominent examples highlighted by the IRS for this year include:

• Unsolicited emails or texts that appear to be from legitimate organizations associated with tax collections or financial institutions, particularly the IRS itself or state tax associations. The IRS will generally first contact taxpayers or companies through physical mail, and never through electronic communications such as emails, texts or social media.
• Unsolicited communications from an independent service that offers taxpayers help in setting up an online IRS account. In reality, no such help is needed, as the process is free and simple, and easily available at www.IRS.gov.
• “Spearphishing” attacks targeted specifically at tax professionals. A normal phishing attack is an often generic text or email message sent to any available email address in hopes of securing personal information. A spearphishing attack is specifically targeted at an individual or a business, making it much more plausible at first glance. A successful attack on a tax professional can result in not only identity theft of the preparer’s clients, but also preparer-specific information, exposing the business itself.

Fraudulent, but submitted, returns
For these scams, the goal is to charge tax preparation fees while claiming legally unsound tax benefits on the return, leaving the taxpayer or company responsible. The theft involved is not the financial data per se, but rather the typically inflated rates that are charged for the preparation service itself. The taxpayer is then on the hook for correcting the return and paying any resulting penalties or fees. Fraudulent benefits often include benefits that are legitimate, but for a very small group, whereas unscrupulous services claim them for virtually every taxpayer. These benefits typically include:

• Employee Retention credit
• Fuel Tax credit
• Fake charities
• Form 8944
• Offers in Compromise
• Schemes with international elements, including offshore accounts, digital assets, and misuse of international tax agreements and treaties

Other common scams of note
Finally, some of the entries on this year’s Dirty Dozen list straddle the line between the two categories described above, where an unscrupulous provider could be either filing a real (but fraudulent) return, attempting data theft, or both. An example would be “shady” tax preparers that refuse to sign or provide their IRS Preparer Tax Identification Number (PTIN), or who charge a fee based on the amount of the return. Both are common signs that the preparer is not legitimate, regardless of their actual intention.

Read the full IRS Dirty Dozen tax scam list release here. As your trusted tax advisor, Weiss & Company LLP is committed to providing a high level of support. Should you have any concerns about whether you have been the target of a tax-related scam, we encourage you to reach out to your tax professional.