IRS warns of pandemic-related tax scams in ‘Dirty Dozen’ for 2021

By Paul Bonner

Thieves stealing economic impact payments and unemployment benefit checks head the list of this year’s IRS “Dirty Dozen” of tax-related scams and schemes (IR-2021-135).

The warning Monday about “pandemic-related scams” was the first of four installments this year in which the IRS highlights egregious tax-related crimes and misdeeds against which it is advising taxpayers to be especially vigilant. In successive days this week, the Service also will describe threats to the security of taxpayers’ personal information, ruses that defraud victims, and schemes that entice taxpayers into taking “unscrupulous” tax-related positions and actions. For this and previous years, see the Dirty Dozen page at IRS.gov.

Economic impact payment theft

Although most economic impact payments, also known as stimulus payments, to individuals have been issued, their security remains a concern, the IRS said. Most of the payments are made electronically by direct deposit to taxpayers’ bank accounts, but even these can be diverted by thieves, the IRS noted. Accordingly, taxpayers should be wary of text messages, phone calls, or emails asking about bank account information. One such ruse requests verification of account information. The IRS suggests deleting such emails without clicking any contained links or even opening them, reminding that the Service does not initiate contact by phone, email, text, or social media asking for Social Security numbers or other personal or financial information related to economic impact payments.

Economic impact payments paid by check can also be stolen from mailboxes, the IRS noted. Suspected losses can be reported to postal inspectors.

Theft of economic impact payments also made the Dirty Dozen list for 2020.

Last month, the Treasury Inspector General for Tax Administration (TIGTA) studied possibly erroneous economic impact payments issued and found more than 2.2 million payments totaling $3.5 billion were issued to deceased individuals and 1.8 million payments totaling $1.4 billion to persons claimed as dependents and thus ineligible to receive them (TIGTA, Implementation of Economic Impact Payments, Rep’t No. 2021-46-034 (May 24, 2021)).

Unemployment fraud

With millions of people out of work during the pandemic, many became eligible for state unemployment benefits, but thieves also targeted claims systems. The IRS reminded taxpayers to be alert to identity theft related to these payments as well. In many cases, the thieves filed fraudulent claims using stolen personal information of individuals who did not file claims. The owners of that information in many cases receive Form 1099-G, Certain Government Payments, reporting unemployment compensation income that they did not in fact receive. Anyone receiving such an erroneous form should contact their state agency for a corrected form, the IRS advised.

As a possible preventive measure against both forms of pandemic-related tax fraud, the IRS also reminded taxpayers that it now allows any eligible individual to obtain an identity protection personal identification number (IP PIN). Formerly the Service extended IP PINs only to confirmed identity theft victims or residents in certain states participating in a pilot opt-in program. The IRS also described other measures it and its Security Summit partners have taken that it said have reduced the incidence of tax-related identity theft.

Paul Bonner (Paul.Bonner@aicpa-cima.com) is a Tax Adviser senior editor.

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