2023 IRS Scams Warning List: Protect Yourself Now!

Are you aware of the newly released “Dirty Dozen” or IRS scams warning list for 2023? As we navigate through 2023, it’s important to be aware of the IRS list of scams that can target taxpayers, businesses, and tax professionals. We’re here to break down the key scams and schemes you should watch out for. Stay vigilant to protect your money and personal information.

Summary Video on 2023 IRS Scams List

Misleading Employee Retention Credit Promotions

First in the IRS scams list this year is frauds for ERC . Beware of scams that aggressively promote large refunds related to the Employee Retention Credit (ERC). These scams often involve false information about eligibility and computation of the credit, leaving victims vulnerable to identity theft. Read the full story about Employee Retention Credit scams.

Fake Emails and Text Messages

Phishing and smishing scams aim to trick victims into providing personal and financial information through seemingly legitimate emails and text messages. Remember that the IRS will never initiate contact through these channels.This is part of IRS scams for quite some time.

Third-Party Online Account Scams

Third in the IRS scams list is “helping hand scams”. Some scammers pose as helpful individuals offering to create your IRS Online Account. They’re simply after your personal information. Create your own account securely on the official IRS website.

Inflated Fuel Tax Credit Claims

Keep an eye out for promotions encouraging false claims for the fuel tax credit, which is meant for specific off-highway business and farming use. Scammers may exploit this credit to inflate refunds using Form 4136.

Fraudulent Charitable Organizations

This entry in IRS scams list is not new.Everyone knows that taxpayers who give money or goods to a charity might be able to claim a deduction on their federal tax return if they itemize deductions, but charitable donations only count if they go to a qualified tax-exempt organization recognized by the IRS.Scammers often establish fake charities to take advantage of people’s generosity. Donate to IRS-recognized, tax-exempt organizations to avoid losing money and personal information.You can search IRS database online of approved charities !

Shady Tax Return Preparers

Be cautious when choosing a tax professional or tax lawyers. Watch for warning signs, such as fee structures based on refund size or preparers refusing to sign or including their IRS Preparer Tax Identification Number (PTIN) on your return.

Misinformation on Social Media

Social media can spread false or misleading tax advice has found entry in the IRS scams list in this year. Be skeptical of schemes that encourage submitting inaccurate information in hopes of receiving a refund and refundable credits.

Targeted Scams Against Tax Professionals

Tax professionals should be on guard for spearphishing attacks, as successful breaches can lead to stolen client data and identity theft. Strengthen your cybersecurity practices to protect yourself and your clients.

Misleading Offer in Compromise Promotions

Avoid “mills” that aggressively promote Offers in Compromise to unqualified individuals. These operations can be costly, and you can check your eligibility for free using the IRS Offer in Compromise Pre-Qualifier tool.

Schemes Targeting High-Income Earners

High-income earners should know about schemes involving Charitable Remainder Annuity Trusts (CRATs), Monetized Installment Sales, micro-captive insurance arrangements, and syndicated conservation easements. Engaging in these schemes can result in penalties and legal trouble. IRS provides details about these tax evasion schemes as under :

1. IRS warns about the schemes that lack many of the attributes of legitimate insurance and involves structures full of implausible risks, failure to match genuine business needs and, in many cases, unnecessary duplication of the taxpayer’s commercial coverages.Such schemes are not true and legally authentic and can be classified as abusive micro-captive insurance company.
2. The scamster uses the provision of section 170 of the Internal Revenue Code under which a taxpayers may claim a charitable contribution deduction for the fair market value of a conservation easement transferred to a charity if the transfer meets the requirements. As per IRS , there are promoters of the shaand abusive arrangements, which generate high fees for promoters, participants attempt to game the tax system with grossly inflated tax deductions.

Offshore and Digital Asset Scams

The IRS monitors attempts to hide assets in offshore accounts and digital assets like cryptocurrency. Don’t fall for claims that these assets are beyond the IRS’s reach.IRS warns that they know and monitor the attempt by some unscrupulous, asset protection professionals and promoters are always looking for U.S. persons who can believe their claim of placing their assets in offshore accounts and structures, saying they are out of reach of the IRS. The IRS asserts that these claims are false and no one should believe such claims. 

Questionable Pension & Insurance Arrangements

Business owners should be cautious about purported insurance arrangements involving Puerto Rican or other foreign corporations. These arrangements often lack the attributes of legitimate insurance and can lead to trouble with the IRS. IRS has provided the details of the scamsters’ modus operandi as under:

1. Maltese individual retirement arrangements misusing treaty: They lure U.S. citizens or residents with the plan to evade tax in the USA by using treaty benefits with Malta for contributing to foreign individual retirement arrangements in Malta. The participants in these transactions typically lack any local connection to the host country. The whole scheme is to get US person to contribute to a pension fund set up in Malta and then claim the benefit by improperly asserting the foreign arrangement as a “pension fund” for U.S. tax treaty purposes. Since US persons not having any connection with malta can not get the benefit of treaty , the whole arrangement is a tax evasion plan.IRS warns people not to go for such plans advised by anyone.
2. Puerto Rican and foreign captive insurance: U.S. business owners of closely held entities participate in a purported insurance arrangement with a Puerto Rican or other foreign corporation in which the U.S. business owner has a financial interest. The U.S. business owner (or a related entity) claims a deduction for amounts paid as premiums for “insurance coverage” provided by a fronting carrier, which reinsures the “coverage” with the Puerto Rican or other foreign corporation. Despite being labeled as insurance, these arrangements lack many of the attributes of legitimate insurance.

I hope this IRS scams list published very timely shall prevent a lots of trouble in future for taxpayers !