Robertson stephens Wealth Planning Commentary June 10, 2024

IRS Reveals the “Dirty Dozen” Tax Scams: A Must-Read for Wealthy Taxpayers

Hold onto your wallets, folks! This spring, the IRS published its annual list of tax scams called the “Dirty Dozen.” For 22 years and counting, the IRS has warned of common scams targeting taxpayers and the tax professional community. This year’s Dirty Dozen list includes bogus charities, phony IRS correspondence and fake IRS websites, ghost preparers, and social media schemes.

Bogus Charities: The Wolf in Sheep's Clothing

Imagine this: a disaster strikes, and you’re feeling generous. Enter the bogus charity, a scammer’s delight. Scammers set up charities to acquire personal information and attract funds from unknowing taxpayers. High-income earners are prime targets for these scams, especially through aggressive, and questionable, Charitable Remainder Trusts (CRTs). Also, beware of phony art donation deductions. Scammers might sell you art at a “discounted” price and then suggest you donate it for an inflated tax deduction a year later. The fraudster may even offer to find a charity that will accept your donation. Taxpayers can confirm whether a charity is legitimate by searching the IRS’s Tax Exempt Organization Search Tool.

Phony IRS Correspondence: The Cyber Trap

Another common tax scheme is impersonating the IRS via correspondence or a phony IRS website. Beware of out-of-theblue emails or messages from the IRS. Taxpayers might receive an email (phishing) or text (smishing) inviting them to click on a link or attachment. Fraudsters use these tools to steal information or send malware to download. Tax preparers are also targeted under the guise of correspondence from a “new client.” Phishing emails might contain an invite to the IRS website; do not be fooled! Taxpayers and preparers may go directly to the legitimate IRS website and establish their own account. Any future correspondence can be verified by logging into the account.

Ghost Preparers: The Vanishing Act

Imagine hiring a tax preparer who promises you a massive refund and then vanishes into thin air after filing your return. These “ghost preparers” target unsuspecting taxpayers, especially seniors, by promising non-existent tax credits and deductions. They disappear post-filing, leaving you with stolen refunds or IRS troubles. Stick with trusted and licensed CPAs. CPAs are licensed by the state. Taxpayers can use their state government’s website to verify a CPA’s credentials.

Social Media Schemes: The Finfluencer Fraud

Social media is buzzing with so-called “finfluencers” dishing out tax advice. But beware, some of this advice is dangerously wrong. They might encourage you to misuse tax documents like Form W-2 to get a bigger refund. Following these schemes can land you in hot water with significant civil and criminal penalties. Remember, if it sounds too good to be true, it probably is.

Stay Safe and Informed

In a world full of scammers, staying informed is your best defense. Always verify the legitimacy of charities, IRS communications, and tax professionals. Use official resources like the IRS website and state licensing boards. If you have any questions or encounter a suspicious situation, don’t hesitate to reach out to your Wealth Manager. Stay sharp, and keep those hard-earned dollars safe!