The IRS 2024 Dirty Dozen

April 17, 2024 3:04 PM

The Internal Revenue Service's annual "Dirty Dozen" collection of top tax scams is now 22 years young, and it shows — thanks to endlessly energetic crooks — no signs of slowing down.

"Scammers are relentless in their attempts to obtain sensitive financial and personal information," said IRS Commissioner Danny Werfel, adding that impersonating the IRS and making enthusiastic use of all technologies, tax incentives and headlines remain favorite tactics.

Sit back and enjoy another year of dirty tricks we hope you didn't fall for.

1. Don't take the bait

Ivelin Radkov/Ivelin Radkov - Fotolia

The IRS kicked off the newest annual Dozen with a warning for all taxpayers (and preparers, who are often targeted with the "new client" scam) who are ceaselessly bombarded by email (phishing) and texts (smishing) to stay vigilant. Fraudsters and ID thieves try to trick recipients into clicking a link, filling out personal and financial information or downloading malware.

These schemes frequently peak during tax season but continue throughout the year. Click on no unknown link, attachment or out-the-blue message claiming to be from the IRS.

2. ERC BS

Magnet attracting people - staff recruiting concept

Andrey Popov - stock.adobe.com

"Aggressive" promoters who dupe taxpayers into questionable Employee Retention Credit claims were so busy this year that the IRS not only slotted them on the Dirty Dozen but also issued an alert about the red flags of a bad ERC claim: too many calendar quarters claimed; government orders that don't qualify; too many employees and wrong calculations; supply chain issues; claiming for too much of a tax period; inaccurate reporting of paid wages; or the promoter swore there was nothing to lose. This entry is too bad, considering the ERC was a magnificent boost to businesses trying to survive and recover from the pandemic.

3. 'Help' not wanted

Pedestrians walk through the IRS headquarters in Washington, D.C.

Andrew Harrer/Bloomberg

An IRS Online Account can provide handy access to an individual's tax information. Little shock that scammers also find that information handy to submit fraudulent returns in a victim's name to steal a big refund. Scammers may make it seem like setting up an account is a complicated chore requiring their assistance — while in the meantime probing for taxpayers' Social Security numbers, ITINs and the like. Taxpayers can easily establish their own Online Account through IRS.gov.

4. Nobody's fuel

Promoters who push improper Fuel Tax Credits notch the next spot on this year's Dirty Dozen. The credit is available only for off-highway business and farming use and not for most taxpayers. Yet sleazy promoters or return preparers mislead taxpayers about fuel use and create fictitious documents or receipts for fuel in exchange for high-octane fees. The IRS has its eye on this scam — with new ID-theft filters and processing systems that put the brakes on many suspicious Fuel Tax Credit refund claims — and those claiming it improperly risk future civil and criminal penalties.

5. Mill work

Andrew Harrer/Bloomberg

Pricey offer-in-compromise mills come next in this Dirty list, crooks who mislead taxpayers into thinking that their tax debts can just evaporate for pennies on the dollar (minus their own excessive fees, of course). OICs are legit; these joints aren't, charging big for a service that taxpayers can obtain, again, for free from the IRS.

6. Give and it hurts

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Those who prey on the desire to help others deserve a special spot, we think, on any Dirty Dozen list. Midway through this year's rundown we have groups masquerading as charitable organizations to attract donations from unsuspecting contributors. After natural disasters and other tragedies, scammers use fake charities — often with legit-sounding names — to steal not only well-intentioned cash but personal and financial information to plow right into tax-related ID fraud.

7. Anti-social

Gabby Jones/Bloomberg

Tax advice on social media can be a minefield: TikTok and other platforms share insanely inaccurate tax advice, sometimes urging misuse of common documents like a W-2 or more obscure ones like 8944s, 7202s or Schedules H. The real kick: Some producers of misleading content are crooks trolling for profit but others — believe it or not — just want attention and clicks.

8. New kid in town

Ivelin Radkov/Ivelin Radkov - Fotolia

Tax pros beware: Crooks are using your own ambition against you with "new client" scams, posing as potential clients using fake emails ("spearphishing," which targets specific individuals, organizations or businesses). Once the preparer responds, the scammer sends a malicious attachment or URL that can pierce the preparer's computer systems. And if a tax preparer falls victim to a data breach, the potential emerges for a river of bogus returns.

9-11. The rich get rooked

Scams targeting high-net-worth taxpayers have blossomed so lushly that the IRS shoehorns a few different scams into one entry of the Dozen:

Art donation deductions: Promoters encourage rich taxpayers to buy various types of art, promising it's worth way more than the purchase price. These schemes encourage purchasers to donate the art after waiting at least a year and to claim a deduction for an inflated fair market value.
CRATs: Charitable remainder trusts are irrevocable trusts that let people donate assets to charity and draw income. A charitable remainder annuity trust pays a specific dollar amount each year. In the hands of scammers, these trusts are sometimes misused to eliminate capital gain.
Monetized installment sales: "Frequently shady deals" where promoters look for taxpayers seeking to defer the recognition of gain upon the sale of appreciated property and then organize an abusive shelter through selling them monetized installment sales.

12. What a world

Szocs Jozsef/Jozsef Szocs - stock.adobe.com

The IRS wraps up the 2024 Dirty Dozen with a warning about promoters selling bogus tax strategies and fraudulent offshore schemes designed to reduce or dodge taxes. These frauds use different tools, including syndicated conservation easements and micro-captive insurance arrangements. Or they may play internationally, such as by stashing money and digital assets in foreign accounts or by using foreign captive insurance and Maltese foreign individual retirement accounts.