Top Tax Scams to Watch for in 2021

kienitz top tax scames to watch for 2021

It’s still early in the year, but that doesn’t mean tax scammers aren’t busy. Every year, con artists and fraudsters come out of the woodwork to take advantage of taxpayers. The only difference is that they might slightly modify their scams. Here is a list of a few scams that taxpayers need to be on the lookout for in 2021.

Scam #1: Canceled Social Security Numbers

Usually taking place over the telephone, scammers will mention that the taxpayer has overdue taxes and that the taxpayer’s social security number could be suspended because of the pending tax debt. They will then demand immediate payment from the taxpayer to avoid having the taxpayer’s social security number canceled.

Scam #2: Taxpayer Advocate Service Spoofing

The Taxpayer Advocate Service is an independent organization that helps taxpayers resolve their tax issues with the IRS. Scammers will pretend to be from the Taxpayer Advocate Service by spoofing the actual telephone number of the Taxpayer Advocate Service on a potential victim’s caller ID. Once they have the taxpayer on the telephone, they will ask for personal information, such as the taxpayer’s social security number.

Scam #3: Beware of “Ghosts”

The law requires anyone paid to prepare or help prepare a federal tax return to possess a valid Preparer Tax Identification Number (PTIN). A legitimate tax preparer will provide his or her name and PTIN with the federal tax return they helped prepare.

But some tax preparers will not sign or provide a PTIN. In other words, they try to act like a ghost by being invisible to the IRS or other government authorities.

Why is this a problem? Because the ghost tax preparer is probably trying to taking advantage of the taxpayer. They might do this by charging unreasonable fees or promising a large tax refund when one isn’t possible.

For example, the ghost tax preparer might improperly claim certain tax deductions to increase the size of the taxpayer’s refund. And oftentimes, the fee they charge the taxpayer is proportional to the refund they claimed to have been able to obtain.

Then once the taxpayer learns the truth, the tax preparer is nowhere to be found thanks to the fact that they never signed the tax return.

Scam #4: Scams Relating to the Coronavirus

The coronavirus pandemic is still alive and well, which means efforts to combat the spread and alleviate the financial effects of this pandemic is ongoing. This includes the federal government potentially sending out more stimulus relief checks to taxpayers. Taxpayers need to be on the lookout for scammers who will use this as a cover for their next scheme.

For example, fraudsters might try to claim the taxpayer needs to pay a fee to receive their stimulus check more quickly. Or they might ask for the taxpayer’s personal information, claiming that the information is required to process and send out the payments.

Tax Scam Red Flags

Tax scammers are getting smarter, which means they have more elaborate and convincing stories to trick innocent taxpayers. Therefore, one of the best ways to avoid falling victim to a scam is to remember some key facts about how the IRS operates. For example, the IRS will never:

  • Call, text or email a taxpayer about a tax refund or stimulus check.
  • Threaten a taxpayer with jail for not paying taxes.
  • Make the first contact with the taxpayer through email, text or social media to ask for personal or financial information about the taxpayer.

If someone claiming to be from the IRS does any of the above, they are trying to scam the taxpayer. In these situations, the taxpayer should report the incident to the FTC Complaint Assistant or the Tax Inspector General for Tax Administration.

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