Protect Your Information

(Straight from the IRS)

Compiled annually, the Dirty Dozen lists a variety of common scams that taxpayers can encounter anytime. The IRS warns taxpayers, tax professionals and financial institutions to beware of these scams. This year’s list is divided into five groups. Here’s an overview of the top twelve tax scams of 2022.

Potentially abusive arrangements
The 2022 Dirty Dozen begins with four transactions that are wrongfully promoted and will likely attract additional agency compliance efforts in the future. Those four abusive transactions involve charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance, and monetized installment sales.

Pandemic-related scams
The IRS reminds taxpayers that criminals still use the COVID-19 pandemic to steal people’s money and identity with phishing emails, social media posts, phone calls, and text messages.
All these efforts can lead to sensitive personal information being stolen, and scammers using this to try filing a fraudulent tax return as well as harming victims in other ways. Some of the scams people should continue to be on the lookout for include Economic Impact Payment and tax refund scams, unemployment fraud leading to inaccurate taxpayer 1099-Gs, fake employment offers on social media, and fake charities that steal taxpayers’ money.

Offer in Compromise “mills”
Offer in Compromise or OIC “mills,” make outlandish claims, usually in local advertising, about how they can settle a person’s tax debt for pennies on the dollar. Often, the reality is that taxpayers pay the OIC mill a fee to get the same deal they could have gotten on their own by working directly with the IRS. These “mills” are a problem all year long, but they tend to be more visible right after the filing season ends and taxpayers are trying to resolve their tax issues perhaps after receiving a balance due notice in the mail.

Suspicious communications
Every form of suspicious communication is designed to trick, surprise, or scare someone into responding before thinking. Criminals use a variety of communications to lure potential victims. The IRS warns taxpayers to be on the lookout for suspicious activity across four common forms of communication: email, social media, telephone, and text messages. Victims are tricked into providing sensitive personal financial information, money, or other information. This information can be used to file false tax returns and tap into financial accounts, among other schemes.

Spear phishing attacks
Spear phishing scams target individuals or groups. Criminals try to steal client data and tax preparers’ identities to file fraudulent tax returns for refunds. Spear phishing can be tailored to attack any type of business or organization, so everyone needs to be skeptical of emails requesting financial or personal information.

A recent spear phishing email used the IRS logo and a variety of subject lines such as “Action Required: Your account has now been put on hold” to steal tax professionals’ software preparation credentials. The scam email contains a link that if clicked will send users to a website that shows the logos of several popular tax software preparation providers. Clicking on one of these logos will prompt a request for tax preparer account credentials. The IRS warns tax pros not to respond or take any of the steps outlined in the email. The IRS has observed similar spear phishing emails claiming to be from “tax preparation application providers.”

The list is not a legal document or a literal listing of agency enforcement priorities. It is designed to raise awareness among a variety of audiences that may not always be aware of developments involving tax administration.

Share this tip on social media — #IRSTaxTip: An Overview of the IRS’s 2022 Dirty Dozen Tax Scams. https://go.usa.gov/xJ7KK

If you want to protect yourself from tax-related identity theft, you can opt into the IP PIN program offered by the IRS.  Currently, there are over 5 million taxpayers participating in the program which enables them to be proactive in preventing identity theft.

If you are interested in joining the movement to protect your identity with the IRS, the fastest and easiest way is by using the IP PIN tool on irs.gov. 

So, what is an IP PIN?  It is a six-digit number assigned to eligible taxpayers to prevent the misuse of Social Security and Individual Identification Numbers on federal income tax returns.  This number is known only to the taxpayer and the IRS and, as long as you can prove your identity, you can apply for an IP PIN.

Use of an IP PIN prevents a return from being filed in your name and is used to verify a taxpayer’s identity by the IRS.  The PIN is valid for one tax year and must be applied for every year.  It can be used when filing a return either on paper or electronically.  For returns for 2021, the online tool will be available on irs.gov on January 10, 2022.

If you have attempted to obtain an IP PIN previously; try again.  The IRS has updated the process and made it easier for taxpayers to be screened in the process and be assigned a number.

If you have been a victim of identity theft, you should still fill out an ID theft Affidavit – Form 14039.  This will trigger an investigation by the IRS into your case and an IP PIN will be automatically mailed via USPS.  Confirmed identity theft victims cannot opt out of the IP PIN program.

If you are not successful in passing the online authentication process, you can file Form 15227 or make a visit to an IRS Taxpayer Assistance Center.   Once Form 15227 is filed, an IRS representative would then call to verify identity with a series of questions.  Once the security check has been completed, an IP PIN would be received approximately a month later.  If you visit a Taxpayer Assistance Center, two forms of picture ID are necessary.  To locate a Taxpayer Assistance Center, you can call 844-545-5640. 

An IP PIN, you ask – what is it?  Well, it is an Identity Protection PIN which prevents the filing of a tax return using your Social Security Number by someone other than you. 

These PINs have been around for several years but were issued only when someone had fraudulent activity on their account or were victims of identity theft.  The IP PIN is valid for one year.

What was once available for only certain individual taxpayers is now available to all individual taxpayers through the Opt-In Program.  As long as you can verify your identity, you can protect yourself. 

Here are a few things the IRS shares that taxpayers should know about the IP PIN:

• It’s a six-digit number known only to the taxpayer and the IRS.
• The opt-in program is voluntary.
• The IP PIN should be entered onto the electronic tax return when prompted by the software product or onto a paper return next to the signature line.
• The IP PIN is valid for one calendar year; taxpayers must obtain a new IP PIN each year.
• Only dependents who can verify their identities may obtain an IP PIN.
• IP PIN users should never share their number with anyone but the IRS and their trusted tax preparation provider. The IRS will never call, email or text a request for the IP PIN.

Currently, taxpayers may obtain an IP PIN for 2021, which should be used when filing any federal tax returns during the year. New IP PINs will be available starting in January 2022.

To obtain an IP PIN, the best option is the Get an IP PIN, the IRS online tool. Taxpayers must validate their identities through Secure Access authentication to access the tool and their IP PIN. Taxpayers who cannot validate their identities online, or on the phone with an IRS employee, may call the IRS to make an appointment at a Taxpayer Assistance Center. They will need to bring one picture identification document and another identification document to prove their identity. Once verified, the taxpayer will receive an IP PIN via U.S. Postal Service within three weeks.

The IP PIN process for confirmed victims of identity theft remains unchanged. These victims will automatically receive an IP PIN each year.

Do what you can to protect yourself.  An ounce of prevention can be worth more than a pound of cure.