The most trending tax and financial industry issues.

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Lane Keeter, CPA

Partner: Tax Consulting, Estate Planning, and Heber Springs Managing Partner

The 2021 IRS "Dirty Dozen"

In what has become somewhat of a rite of summer, the IRS annually releases a "Dirty Dozen" tax scam list in which it warns taxpayers, tax professionals and financial institutions to be on the lookout for twelve "nefarious schemes and scams". 

The 2021 list has now been created, and in interesting twist, the IRS decided to release them in four separate installments, separated into these four categories:

  • pandemic-related scams like Economic Impact Payment theft;
  • personal information cons including phishing, ransomware and phone "vishing;"
  • ruses focusing on unsuspecting victims like fake charities and senior/immigrant fraud; and
  • schemes that persuade taxpayers into unscrupulous actions such as Offer In Compromise mills and syndicated conservation easements.

Given the severity of these crimes and the significant damage they can cause, not to mention the depth of the information you need to know to successfully fight these tactics, we will likewise discuss these over a series of columns beginning today. So, let's get to it.

Economic Impact Payment theft made a debut on 2020 list, and is a continuing threat. Identity thieves seek to steal Economic Impact Payments (EIPs), also known as stimulus payments. Most people who are eligible for EIPs will get theirs automatically from the IRS. Here are some tips to help you avoid falling victim to EIP theft:

  • Any text messages, random incoming phone calls or emails inquiring about bank account information or requesting recipients to click a link or verify data should be considered suspicious and deleted without opening.
  • Be alert to mailbox theft. Frequently check mail and report suspected mail losses to Postal Inspectors.
  • Don't fall for stimulus check scams. The IRS won't initiate contact by phone, email, text or social media asking for Social Security numbers or other personal or financial information related to Economic Impact Payments.

Remember, is the IRS official website for information on payments, refunds and other tax information.

Unemployment fraud leading to inaccurate taxpayer 1099-Gs is new to this list for 2021.

Over the past 15 or 16 months, many people lost their jobs and received unemployment compensation because of the Covid-19 pandemic. Scammers also took advantage of the pandemic by filing fraudulent claims for unemployment compensation using stolen personal information of individuals who had not filed claims.

If this has happened using your information, you likely will be sent a Form 1099-G reporting unemployment compensation income that you didn't actually receive. If this happens to you, the IRS urges you to contact the appropriate state agency for a corrected form. Further, the IRS says if a corrected form cannot be obtained in time for you to file a timely tax return, you should complete your return by claiming only the unemployment compensation and other income you actually received, even if different from what the 1099-G shows. 

The IRS makes IP PINs available to all taxpayers this year, adding another layer of security to help protect taxpayers. Before, it was available only to victims of ID theft or taxpayers in certain states. 

The IP PIN is a six-digit code known only to the taxpayer and to the IRS. It helps prevent identity thieves from filing fraudulent tax returns using a taxpayer's personally identifiable information.

Using an IP PIN is, essentially, a way to lock a tax account. The IP PIN serves as the key to opening that account. Electronic returns that do not contain the correct IP PIN will be rejected and paper returns will go through additional scrutiny for fraud.

Another way to help prevent fraud when using tax preparation software is multi-factor authentication. I'm not sure there is any tax preparation software out there anymore that doesn't use this method of identifying that you are who you say you are, but if you encounter one, don't use it! 

Multi-factor authentication is an important tool in helping you better protect online accounts. One way this is accomplished is by requiring a security code sent to a mobile phone in addition to the username and password used to access the account.

The IRS, its Security Summit partners and tax preparation professionals are working hard to help reduce identity theft-related refund fraud. Your awareness of the schemes, the typical signs thereof, and things you can do go a long way to keep you protected. 

Next time, we'll look at other personal information cons involving email, phones and social media.

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