As the pandemic battered the economy in 2020, the Association of Certified Fraud Examiners predicted a rising tide of tax fraud scams that would escalate in 2021. As tax season heats up, that prediction is bearing out, and even savvy professionals aren’t immune. Here’s what you need to know, and how to protect against fraud.

Popular Scams Leverage Fear, Create Sense of Urgency

Many of the more effective scams leverage fear and create a false sense of a need for immediate action.  A common tactic is the use of emails or phone calls in which the scammer scares the recipient into believing a tax problem exists and requires immediate resolution to prevent large fines or even arrest, and the scammer then demands information or money to resolve the “problem.”

Increasing Levels of Sophistication

Recently, individuals have received phony tax notices supposedly from the IRS.  The scammer generates a very realistic copy of an IRS notice once they have a name, address, and social security number to demand information or money.  Most people, tax practitioners included, give urgent attention to IRS notices – a necessary element for the scammer.

I received a tax notice – how do I know if it’s legitimate?

The tax notice will provide a phone number and address where you can contact the tax authority.  If the notice seems suspicious, go to the tax authority’s website (i.e., www.IRS.gov) and input the phone number and address in the search box to determine the authenticity.

Another method to determine authenticity of the notice is to call the tax authority using a phone number from their website.  Do not use the phone number on the tax notice as you might be playing into the hands of the scammer.

The IRS provides a fraud prevention resource center that includes information on when and how the IRS makes contact with taxpayers, and how to report scams.

The tax notice is fraudulent. Now what?

Do not call the phone number on the tax notice or send a response.  As noted above, the IRS provides some avenues for reporting the scam on their website.  Fraudulent tax notices can be sent to the IRS and a complaint can be filed with the Treasury Inspector General for IRS impersonation scams, even if you sent money to the scammer. Phone scams can be reported to the Federal Trade Commission (FTC), and unsolicited or “phishing” emails can be forwarded to the IRS at mailto:phishing@irs.gov.

Additional Resources

Read the ACFE report on Fraud in COVID-19 

IRS tips and resources on phishing and scams

Protect Your Business or Organization – Talk to a Tax Professional

Protecting yourself and your business or organization against fraud requires constant vigilance, especially in times of heightened stress (like during a pandemic). Your tax professional can help you navigate with confidence. If your business or organization has concerns about protecting against fraud, talk with a Barnes Dennig tax professional – we’re here to help.