Dirty Dozen Tax Scams: 2020 Edition

by NFS | Aug 24, 2020 | Archives, Blog Posts

The “Dirty Dozen” is a list of common tax scams that target taxpayers. Compiled and issued annually every year by the IRS, this year it includes many aggressive and evolving schemes related to coronavirus tax relief, including Economic Impact Payments. The criminals behind these bogus schemes view everyone as potentially easy prey and everyone should be on guard, especially vulnerable populations such as the elderly.

While tax-related scams usually increase at tax time, this year, scam artists are using pandemic to try stealing money and information from honest taxpayers. As such, taxpayers should refrain from engaging potential scammers online or on the phone.

Here are this year’s “Dirty Dozen” tax scams:

1. Phishing

Taxpayers should be alert to potential fake emails or websites looking to steal personal information. IRS Criminal Investigation has seen a tremendous increase in phishing schemes utilizing emails, letters, texts, and links. These phishing schemes are using keywords such as “coronavirus,” “COVID-19” and “Stimulus” in various ways.

These schemes are blasted to large numbers of people to get personal identifying information or financial account information, including account numbers and passwords. Most of these new schemes are actively playing on the fear and unknown of the virus and the stimulus payments.

Don’t click on links claiming to be from the IRS and be very wary of emails and websites as they may be nothing more than scams to steal personal information. As a reminder, the IRS will never initiate contact with taxpayers via email about a tax bill, refund or Economic Impact Payments.

2. Fake Charities

Criminals frequently exploit natural disasters and other situations such as the current COVID-19 pandemic by setting up fake charities to steal from well-intentioned people trying to help in times of need. Fake charity scams generally rise during disaster times like these.

Fraudulent schemes normally start with unsolicited contact by telephone, text, social media, e-mail, or in-person using a variety of tactics. Bogus websites use names similar to legitimate charities to trick people to send money or provide personal financial information. They may even claim to be working for or on behalf of the IRS to help victims file casualty loss claims and get tax refunds.

Taxpayers should be particularly wary of charities with names like nationally known organizations. Legitimate charities will provide their Employer Identification Number (EIN) if requested, which can be used to verify their legitimacy. Taxpayers can find legitimate and qualified charities using the search tool on IRS.gov.

3. Threatening Impersonator Phone Calls

IRS impersonation scams come in many forms such as receiving threatening phone calls from a criminal claiming to be with the IRS where the scammer attempts to instill fear and urgency in the potential victim. These types of phone scams or “vishing” (voice phishing) pose a major threat. Scam phone calls, including those threatening arrest, deportation or license revocation if the victim doesn’t pay a bogus tax bill, are reported to the IRS year-round and are very common. These calls often take the form of a “robocall” (a text-to-speech recorded message with instructions for returning the call).

The fact is, the IRS will never threaten a taxpayer or surprise him or her with a demand for immediate payment. Nor will it threaten, ask for financial information over the phone, or call about an unexpected refund or Economic Impact Payment. Taxpayers should contact the real IRS or consult a tax and accounting professional if they are worried there is a tax problem.

4. Social Media Scams

Social media enables anyone to share information with anyone else on the Internet. Scammers use that information as ammunition for a wide variety of scams. As such, taxpayers need to protect themselves against social media scams, which frequently use events like COVID-19 to try tricking people. These methods of trickery include emails where scammers impersonate someone’s family, friends or co-workers.

Social media scams have also led to tax-related identity theft. The basic element of social media scams is convincing a potential victim that he or she is dealing with a person close to them that they trust via email, text or social media messaging.

Using personal information, a scammer may email a potential victim and include a link to something of interest to the recipient which contains malware intended to commit more crimes. Scammers also infiltrate their victim’s emails and cell phones to go after their friends and family with fake emails that appear to be real and text messages soliciting, for example, small donations to fake charities that are appealing to the victims.

5. Economic Impact Payment or Refund Theft

Great strides have been made against refund fraud and theft in recent years, but they remain an ongoing threat. Due to the coronavirus pandemic, this year, criminals turned their attention to stealing Economic Impact Payments as provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Much of this stems from identity theft whereby criminals file false tax returns or supply other bogus information to the IRS to divert refunds to wrong addresses or bank accounts.

Recent victims of this type of scam include residents of nursing homes and other care facilities when concerns were raised that people and businesses may be taking advantage of vulnerable populations who received the payments. Economic Impact Payments generally belong to the recipients, not the organizations providing the care.

As a reminder, economic impact payments do not count as a resource for determining eligibility for Medicaid and other federal programs They also do not count as income in determining eligibility for these programs.

6. Senior Citizen Fraud

Seniors are more likely to be targeted and victimized by scammers than other segments of society and fraud targeting older Americans is pervasive. Financial abuse of seniors is a problem among personal and professional relationships but seems to be less of a problem when the service provider knows that a trusted friend or family member is keeping an eye out and taking an interest in the senior’s affairs.

Also, as older Americans become more comfortable with evolving technologies, such as social media, scammers have moved in to take advantage. Phishing scams linked to Covid-19, for example, have been a major threat this filing season. Seniors need to be alert for a continuing surge of fake emails, text messages, websites, and social media attempts to steal personal information.

7. Scams Targeting Non-English Speakers

IRS impersonators and other scammers also target groups with limited English proficiency. These scams target those potentially receiving an Economic Impact Payment and request personal or financial information from the taxpayer.

Phone scams are often threatening in nature and pose a major threat to people with limited access to information, including individuals not entirely comfortable with the English language. These calls frequently take the form of a “robocall” (a text-to-speech recorded message with instructions for returning the call), but in some cases may be made by a real person. These con artists may have some of the taxpayer’s information, including their address, the last four digits of their Social Security number or other personal details, which makes the phone calls seem more legitimate.

One of the most common scams is the IRS impersonation scam where a taxpayer receives a telephone call threatening jail time, deportation or revocation of a driver’s license from someone claiming to be with the IRS. Taxpayers who are recent immigrants often are the most vulnerable and should ignore these threats and not engage the scammers.

8. “Ghost” Tax Return Preparers

Selecting the right return preparer is important because they are entrusted with a taxpayer’s sensitive personal data. Most tax professionals provide honest, high-quality service, but dishonest preparers pop up every filing season committing fraud, harming innocent taxpayers or talking taxpayers into doing illegal things they regret later.

Taxpayers should always avoid so-called “ghost” preparers who expose their clients to potentially serious filing mistakes as well as possible tax fraud and risk of losing their refunds. With many tax professionals impacted by COVID-19 and their offices potentially closed, taxpayers should take particular care in selecting a credible tax preparer.

Ghost preparers don’t sign the tax returns they prepare. They may print the tax return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost preparer will prepare but not digitally sign as the paid preparer. By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on returns.

Unscrupulous preparers may also target those without a filing requirement and may or may not be due to a refund. They promise inflated refunds by claiming fake tax credits, including education credits, the Earned Income Tax Credit (EITC), and others. Taxpayers should avoid preparers who ask them to sign a blank return, promise a big refund before looking at the taxpayer’s records or charge fees based on a percentage of the refund.

Taxpayers are ultimately responsible for the accuracy of their tax return, regardless of who prepares it.

9. Offer in Compromise (OIC) Mills

Taxpayers need to be wary of misleading tax debt resolution companies that can exaggerate chances to settle tax debts for “pennies on the dollar” through an Offer in Compromise (OIC). These offers are available for taxpayers who meet very specific criteria under the 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.

These scams are commonly called OIC “mills,” which cast a wide net for taxpayers, charge them pricey fees and churn out applications for a program they’re unlikely to qualify for. Although the OIC program helps thousands of taxpayers each year reduce their tax debt, not everyone qualifies for an OIC. In Fiscal Year 2019, there were 54,000 OICs submitted to the IRS. The agency accepted 18,000 of them.

10. Fake Payments with Repayment Demands

Criminals are always finding new ways to trick taxpayers into believing their scam including putting a bogus refund into the taxpayer’s actual bank account. Here’s how the scam works:

A con artist steals or obtains a taxpayer’s data including Social Security number or Individual Taxpayer Identification Number (ITIN) and bank account information. The scammer files a bogus tax return and has the refund deposited into the taxpayer’s checking or savings account. Once the direct deposit hits the taxpayer’s bank account, the fraudster places a call to them, posing as an IRS employee. The taxpayer is told that there’s been an error and that the IRS needs the money returned immediately or penalties and interest will result. The taxpayer is told to buy specific gift cards for the amount of the refund.

The IRS will never demand payment by a specific method. There are many payment options available to taxpayers and there’s also a process through which taxpayers have the right to question the amount of tax we say they owe. Anytime a taxpayer receives an unexpected refund and a call from us out of the blue demanding a refund repayment, they should reach out to their banking institution and the IRS.

11. Payroll and HR Scams

Tax professionals, employers, and taxpayers need to be on guard against phishing designed to steal Form W-2s and other tax information. These are Business Email Compromise (BEC) or Business Email Spoofing (BES). This is particularly true with many businesses closed and their employees working from home due to COVID-19. Currently, two of the most common types of these scams are the gift card scam and the direct deposit scam.

Gift card scam. In the gift card scam, a compromised email account is often used to send a request to purchase gift cards in various denominations.

Direct deposit scam. In the direct deposit scheme, the fraudster may have access to the victim’s email account (also known as an email account compromise or “EAC”). They may also impersonate the potential victim to have the organization change the employee’s direct deposit information to reroute their deposit to an account the fraudster controls.

BEC/BES scams have used a variety of ploys to include requests for wire transfers, payment of fake invoices as well as others. In recent years, the IRS has observed variations of these scams where fake IRS documents are used to lend legitimacy to the bogus request. For example, a fraudster may attempt a fake invoice scheme and use what appears to be a legitimate IRS document to help convince the victim.

The Direct Deposit and other BEC/BES variations should be forwarded to the Federal Bureau of Investigation Internet Crime Complaint Center (IC3) where a complaint can be filed. The IRS requests that Form W-2 scams be reported to phishing@irs.gov (Subject: W-2 Scam).

12. Ransomware

Ransomware is malware targeting human and technical weaknesses to infect a potential victim’s computer, network, or server and is a rapidly growing cybercrime. It doesn’t just affect individuals either. Recently, Garmin Ltd., a GPS, and fitness-tracker company was the victim of a ransomware attack and asked to pay $10 million in “ransom” to restore its systems.

Malware is a form of invasive software that is often frequently inadvertently downloaded by the user. Once downloaded, it tracks keystrokes and other computer activity. Once infected, ransomware looks for and locks critical or sensitive data with its encryption. In some cases, entire computer networks can be adversely impacted.

Victims generally aren’t aware of the attack until they try to access their data, or they receive a ransom request in the form of a pop-up window. These criminals don’t want to be traced so they frequently use anonymous messaging platforms and demand payment in virtual currency such as Bitcoin.

Cybercriminals might use a phishing email to trick a potential victim into opening a link or attachment containing the ransomware. These may include email solicitations to support a fake COVID-19 charity. Cybercriminals also look for system vulnerabilities where human error is not needed to deliver their malware.

If you think you’ve been a victim of a tax scam, please contact the office immediately.

Paying off Debt the Smart Way

by NFS | Aug 12, 2020 | Archives, Blog Posts

With a potential economic downturn in the wings due to COVID-19, being debt-free is a worthwhile goal. Unfortunately, between mortgages, car loans, credit cards, and student loans, this is unrealistic for most people – especially those of pre-retirement age. Instead, it’s better to start by focusing on managing debt. When you handle debt wisely, you won’t have to shell out every cent of your hard-earned money to your lender or feel like you’re always on the verge of bankruptcy.

These tips will help you get started paying off debt the smart way and help you save extra money to pay down those debts even faster:

Assess the Situation

First, assess how much and what type of debt you have by writing it down using pencil and paper or entering the data into a spreadsheet like Microsoft Excel. You can also use a bookkeeping program such as Quicken or a debt management app such as Debt Manager, Debt Payoff Planner or if you are only concerned about student loan debt, Changed. When compiling or entering your list be sure to Include every instance you can think of where a company has given you something in advance of payment such as your mortgage, car payment(s), credit cards (all of them), tax liens, student loans, PayPal Credit, and store payments or cards used on electronics or other household items such as Home Depot or Best Buy.

Record the day the debt began and when it will end (check your credit card statements), the interest rate you’re paying, and what your payments typically are. Next, as painful as that might be, add it all up – try not to be discouraged. Remember, the goal is to break this down into manageable chunks while finding extra money to help pay it down.

If you’re one of the millions of people who have lost their jobs during the coronavirus pandemic, many auto and student loan lenders, as well as mortgage and credit card issuers are offering temporary concessions. Before you make any payments call or visit their websites to see what their policies are during the pandemic and whether there are options for deferral and other measures you can take.

Identify High-Cost Debt

Even if you haven’t lost your job or experienced sickness related to COVID-19, it never hurts to identify which debt is more expensive than others and pay it off first. Unless you’re getting a payday loan – which you shouldn’t be – the worst offender is consumer debt such as personal loans, auto loans, and credit cards with high-interest rates. Credit cards are easiest to tackle so start with them first. Here’s how to deal with them:

• Don’t use them. You don’t have to cut them up, but take them out of your wallet, put them in a drawer, and only access the one with the lowest interest rate in an emergency.
• Identify the card with the highest interest and pay off as much as you can every month and pay the minimum amount due on other cards. When that one is paid off, work on the card with the next highest rate. Check your credit cards for balance transfer rates and transfer balances from higher interest accounts to a lower interest one. When you pay less interest, you can pay down your debt faster. The catch is that at the end of the balance transfer period (typically 6 to 12 months), the low or if you’re lucky, zero interest rate, reverts to a higher credit card interest rate.
• Don’t close existing cards or open any new ones. It won’t help your credit rating, and in fact, will only hurt it.
• Pay on time, absolutely every time. Late payments – even one – can lower your FICO score.
• Go over your credit card statements in detail and look for monthly charges for things you no longer use or don’t need anymore.
• Call your credit card companies and ask them nicely if they would lower your interest rates – sometimes it works!

Save, Save, Save

Do whatever you can to retire debt – even if it means reevaluating your priorities and changing your lifestyle. Consider taking a second job and using that income only for higher payments on your financial obligations. Substitute free family activities for high-cost ones. Sell high-value items that you can live without.

Do Away with Unnecessary Items to Reduce Debt Load

Think twice before purchasing the latest high-tech gadgets. Do you need the latest iPhone? You’ll be surprised at what you don’t miss. Consider buying a used car, forgoing that expensive gym membership you don’t have time to use anymore, visiting the public library to check out DVDs or subscribing to a video streaming company instead of going to the movies – at least until your debt is under control.

Never, Ever Miss a Payment

Not only are you retiring debt, but you’re also building a stellar credit rating. If you ever get another job, buy a house, rent an apartment, or buy another car, you’ll want to have the best credit rating possible. A blemish-free payment record will help with that. Besides, credit card companies can be quick to raise interest rates because of one late payment and a completely missed one is even more serious.

Pay with Cash

To avoid increasing debt load, make it a habit to pay for everything you purchase with cash or a debit/credit card. If you don’t have the cash (or the money in your bank account) for it, you probably don’t need it. You’ll feel better about what you do have if you know it’s owned free and clear.

Shop Wisely, and Use the Savings to Pay Down Your Debt

If your family is large enough to warrant it, invest $45 to $60 and join a store like Sam’s or Costco – and use it. Shop there first, then at the grocery store. Change brands if you have to and swallow your pride. If you’re concerned about buying organic, rest assured that even at places like Costco you will have many options. Use coupons and store savings clubs religiously. Calculate the money you’re saving and use it to pay down debt. Remember, every penny counts, and even if it’s a small amount every month, consistently saving adds up over time.

While each of these steps, taken alone, probably doesn’t seem like much, if you adopt as many as you can, you’ll see your debt decrease every month. If you need help managing debt or need advice regarding steps you can take to recession-proof your finances, help is just a phone call away.

Tax Returns Are Due Today – Taxpayers Who Can’t Pay Should Still File Today

by NFS | Jul 15, 2020 | Archives, Blog Posts

Today, 2019 tax returns are due. Taxpayers should remember to file or request an extension of time to file and pay any taxes they owe by the July 15 deadline to avoid penalties and interest. Here are some tips for taxpayers who owe tax, but who can’t immediately pay their tax bill.

Taxpayers should:

• File their tax return or request an extension of time to file by the July 15 deadline.
  • People who owe tax and do not file their return on time or request an extension may face a failure-to-file penalty for not filing on time.
  • Taxpayers should remember that an extension of time to file is not an extension of time to pay.
    • An extension gives taxpayers until Oct. 15, 2020 to file their 2019 tax return, but taxes owed are still due July 15, 2020.

• Pay as much as possible by the July 15 due date.
  • Whether filing a return or requesting an extension, taxpayers must pay their tax bill in full by the July filing deadline to avoid penalties and interest.
  • People who do not pay their taxes on time will face a failure-to-pay penalty.
  •  IRS.gov has information for taxpayers who can’t afford to pay taxes they owe.

• Set up a payment plan as soon as possible.
  • Taxpayers who owe but cannot pay in full by the deadline don’t have to wait for a tax bill to request a payment plan.
  • They can apply for a payment plan on IRS.gov.
  • Taxpayers can also submit a payment plan request in writing using Form 9465, Installment Agreement Request.

Some disaster victims, military service members and eligible support personnel in combat zones have more time beyond the July 15 deadline to file and pay their taxes.

Taxpayers should also check their state filing and payment deadlines, which may be different from the federal July 15 deadline. A list of state tax division websites is available through the Federation of Tax Administrators.

The IRS is processing tax returns, issuing refunds and accepting payments. Taxpayers who mail or who have already mailed a tax return will experience a longer wait. The IRS will process these returns in the order received and there is no need to file a second tax return or call the IRS.

Trump Signs Small Business Loan Program Extension

by NFS | Jul 7, 2020 | Archives, Blog Posts

President Trump signed legislation Saturday extending the deadline for small businesses to apply for the Paycheck Protection Program, enacted in the weeks following the economic shutdown caused by the coronavirus pandemic.

The original deadline to apply for the PPP was June 30th, but $130 billion still remained in the fund, out of $660 billion allocated. Both houses of Congress approved the extension unanimously earlier this week. With Trump’s signature Saturday, businesses will now have until Aug. 8 to apply for the assistance.

The PPP lets businesses get direct government subsidies for payroll, rent and other costs. The subsidies come as federal loans, but those loans can be forgiven if businesses use at least 60% of the funds for payroll.

The program has so far doled out about $520 billion in loans to almost 5 million small businesses across the country. The loans were meant to let businesses cover about two and a half months of typical costs.

The program’s sponsors say they want to re-purpose the program to better serve the challenges businesses are facing now, several months into the pandemic.

If you missed the first two opportunities and need any assistance in applying for this program, please do not hesitate to contact the office.