IRS Unveils Top Tax Scams and Threats to Watch For
The Internal Revenue Service (IRS) has released its annual "Dirty Dozen" list of tax scams for 2025, cautioning taxpayers, businesses, and tax professionals to remain vigilant against prevalent schemes that endanger their tax and financial data. These fraudulent tactics, which range from phishing email schemes to deceptive tax credits, tend to surge during the tax filing season as individuals prepare their tax returns. However, they can occur year-round as fraudsters continuously seek opportunities to illicitly obtain money, personal information, and data.
The "Dirty Dozen" campaign features 12 scams and schemes that pose significant threats to taxpayers. While it is not a legal document or a formal list of enforcement priorities, this educational initiative aims to increase awareness and shield taxpayers and tax professionals from prevalent tax scams and fraudulent activities.
Scammers persistently exploit the tax season to deceive taxpayers into various traps, which can result in identity theft or mislead individuals into claiming undeserved tax credits. For over two decades, the IRS has emphasized the "Dirty Dozen" through extensive communication and educational outreach as part of a broader mission to safeguard taxpayers from fraud.
Together with efforts from the Security Summit, the IRS has collaborated with state tax authorities, national tax software companies, the financial industry, and tax professionals for over a decade. This coalition educates the public about scams and fraudulent schemes. The "Dirty Dozen" list often warns against tax-related identity theft, supporting the Security Summit's ongoing efforts, which have successfully protected millions of taxpayers and billions in refund fraud.
To further these protective measures against ever-evolving scams, the IRS's 2025 "Dirty Dozen" list emphasizes the following 12 significant threats:
Email Phishing Scams - The IRS continues to encounter numerous email and text scams targeting taxpayers and associated parties. It's crucial for taxpayers and tax professionals to remain vigilant against deceptive communications from entities replicating legitimate organizations within the tax and financial sectors, including the IRS, state tax agencies, and tax software companies. These scammers frequently send unsolicited texts or emails designed to trick unsuspecting individuals into disclosing valuable personal and financial information, potentially leading to identity theft. The two primary types of these scams are:
Phishing: This involves emails from fraudsters pretending to be the IRS. Often, these emails use tactics like promising a fake tax refund or threatening legal or criminal action for tax fraud to manipulate victims into the scam.
Smishing: This pertains to text or smartphone SMS messages, where scammers employ alarming phrases such as "Your account has been put on hold" or "Unusual Activity Report," accompanied by a fake "Solutions" link to allegedly restore the recipient’s account. The suggestion of unexpected tax refunds can also be used as bait by these scammers.
Remember, never click on unsolicited communications claiming to be from the IRS, as they might discreetly install malware. These actions may also pave the way for malicious hackers to deploy ransomware, preventing legitimate users from accessing their systems and files.
The IRS offers comprehensive information to help individuals understand and report these email scams.
Bad Social Media Advice -In 2025, the issue of incorrect tax information on social media remains a significant concern, as it has the potential to mislead honest taxpayers and lead to identity theft and tax complications. Many social media platforms, including TikTok, frequently share inaccurate or misleading tax advice, with some posts even encouraging the misuse of standard tax documents like Form W-2.
The IRS advises against falling for these scams and strongly recommend that individuals rely on tax information from trusted sources such as the IRS and qualified tax professionals. The IRS also reminds taxpayers that those who knowingly file fraudulent tax returns may face serious civil and criminal penalties.
IRS Individual Online Account Help from Scammers - Swindlers can pose as a "helpful" third party and offer to help create a taxpayer's IRS Individual Online Account at IRS.gov. In reality, no help is needed, and the agency offers tips on how to sign up and avoid scams. The IRS Individual Online Account provides taxpayers with valuable personal tax information. But watch out: Third parties making these offers will try to steal a taxpayer's personal information and try to submit fraudulent tax returns in the victim's name to get a big refund.
Fake Charities -Fraudulent charities consistently present a problem, often intensifying during crises or natural disasters. These scams are set up by individuals aiming to exploit the public's generosity. They primarily seek money and personal information, which can later be used for identity theft and other exploits against victims.
For taxpayers who contribute money or goods to charity, there is potential to claim a deduction on their federal tax return if they choose to itemize deductions. However, these charitable donations are only eligible for tax deductions if they are directed to a tax-exempt organization officially recognized by the IRS. The validity of charities can be checked on the IRS site as well as the Charity Navigator site.
False Fuel Tax Credit Claims - In the past year, a significant issue arose concerning taxpayers who were misled into believing they qualified for the Fuel Tax Credit. This credit is specifically intended for off-highway business and farming use and does not apply to the majority of taxpayers. Nonetheless, some unethical tax return preparers and promoters, including individuals on social media platforms, have persistently enticed taxpayers to erroneously claim the credit as a strategy to inflate their refunds. The IRS has observed a rise in the promotion of filing these refundable credits through Form 4136, Credit for Federal Tax Paid on Fuels. The IRS strongly advises individuals to seek detailed information to ensure they are accurately claiming this credit.
Credits for Sick Leave and Family Leave -This specialized credit was made available for self-employed individuals specifically for the tax years 2020 and 2021, coinciding with the pandemic. Please note that this credit is not applicable for subsequent tax years. The Internal Revenue Service (IRS) has observed recurrent instances of taxpayers erroneously utilizing Form 7202, designed for Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to improperly claim credits based on income earned as an employee, rather than as a self-employed individual.
Bogus Self-employment Tax Credit - Misinformation continues to spread on social media concerning a fictitious "Self-Employment Tax Credit," misleading taxpayers into submitting erroneous claims. Promoters falsely advertise it as an opportunity for self-employed individuals and gig workers to receive substantial payments related to the COVID-19 pandemic period. This mirrors the deceptive marketing practices associated with the Employee Retention Credit, with inaccurate claims circulating that suggest widespread eligibility for a tax credit and payments of up to $32,000, when in fact, this is not the case.
In actuality, the credit being misrepresented on social media is not the “Self-Employment Tax Credit” but rather the more restrictive and technical Credits for Sick Leave and Family Leave. Many individuals do not qualify for these credits, and the IRS is conducting thorough reviews of claims submitted under this provision. Taxpayers are advised to file claims under these credits at their own risk.
Improper Household Employment Taxes - Taxpayers “invent” fictional household employees and then file Schedule H (Form 1040), Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid.
Overstated Withholding Scam - A recent fraudulent scheme circulating on social media urges individuals to fraudulently complete Form W-2, Wage and Tax Statement, or other forms such as Form 1099-NEC and other 1099 documents, with fabricated income and withholding details.
This overstated withholding scheme involves scam artists advising individuals to invent substantial income and withholding figures, as well as a fictitious employer supplying these amounts. These scam artists then direct individuals to electronically file the falsified tax return, aiming to secure a considerable refund based on the inflated, yet fraudulent, withholding amounts.
If the IRS cannot authenticate the wages, income, or withholding credits claimed in the tax return, the processing of the tax refund will be suspended pending additional review. Taxpayers are advised to always file a thorough and truthful tax return, utilizing only legitimate information returns, such as those issued by an employer (e.g., Form W-2), to accurately complete their returns.
Numerous variations of the overstated withholding credit scheme exist, including those utilizing Forms W-2 and W-2G; Forms 1099-R, 1099-NEC, 1099-DIV, 1099-OID, and 1099-B; as well as implicating entities like the Alaskan Dividend Fund, Schedule K-1 with Withholding Reported, and other unspecified sources claiming withholding credit.
Misleading Offers in Compromise
The Offers in Compromise (OIC) program is an important program that helps people settle their federal tax debts when they are unable to pay in full. But "mills" can aggressively promote Offers in Compromise in misleading ways to people who clearly don't meet the qualifications, frequently costing taxpayers thousands of dollars. A taxpayer can check their eligibility for free using the IRS Offer in Compromise Pre-Qualifier tool.
Ghost Tax Return Preparers
Most tax preparers provide outstanding and professional service. However, people should be careful of shady tax professionals and watch for common warning signs, including charging a fee based on the size of the refund. A major red flag or bad sign is when the tax preparer is unwilling to sign the return. Avoid these "ghost" preparers, who will prepare a tax return but refuse to sign or include their IRS Preparer Tax Identification Number (PTIN) as required by law. Taxpayers should never sign a blank or incomplete return. Instead, the IRS reminds taxpayers to turn to a trusted tax professional for help.
New Client Scams and Spear Phishing
In 2025, the IRS continues to observe the persistent "new client" scam, characterized by spear phishing attacks specifically targeting tax professionals. Cybercriminals masquerade as prospective clients to deceive tax professionals and other businesses into engaging with their emails. Upon response, the scammers distribute malicious attachments or URLs designed to compromise the preparer's computer systems, consequently granting attackers access to sensitive client data.
This technique, known as phishing, involves emails or text messages crafted to extract personal information from recipients, while spear phishing refers to a more focused attempt aimed at a particular organization or business. Tax professionals are frequently preyed upon by such scams. The heightened threat from spear phishing lies in its capacity to not only steal client data but also seize the tax professional’s identity, facilitating the filing of fraudulent tax returns using the purloined information.
Businesses and individuals, including tax preparers, must diligently scrutinize for any suspicious requests or anomalous behavior before divulging sensitive information or responding to emails. Warning indicators often include poorly constructed sentences and peculiar word choices. It is crucial to recognize that scammers, upon accessing a compromised email account, can discover legitimate emails previously sent by victims to their tax professionals.
While professional tax preparers are mindful of these scams, ghost preparers often neglect to exercise such caution, potentially exacerbating the risk of data breaches and fraudulent activities.
If you have been victim to any of these or other scams or if your identity is stolen, your life can become a nightmare. Identity thieves will even file tax returns under your Social Security number claiming huge refunds and leaving you with a horrendous mess to clean up with the IRS. Don’t be a victim, contact this office for assistance.
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