In this episode of The Standard Deduction, Tax Directors Candace Varner and Ben Hake discuss the IRS’ “Dirty Dozen” list – trending tax scams, schemes, and offers that sound too good to be true – and what you need to know to steer clear of trouble.
Official IRS website to search for tax exempt organizations/charities: https://www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations
The Standard Deduction podcast is hosted by Tax Directors Candace Varner and Ben Hake. This podcast is a thoughtful, informed discussion about ideas, trends and developments in taxes related to personal wealth management.
Our mission is to educate and inspire people to make better financial choices through knowledge, tools and strategies. We believe that education and planning are key components of financial success. Come explore relevant financial topics with our team.
Important Legal Disclosure:
Have questions or topic suggestions?
Email us @ [email protected]
Ben Hake: Hello and welcome to The Standard Deduction. I’m Ben Hake.
Candace Varner: And I’m Candace Varner. I hope everyone is enjoying their summer. I know we certainly are because there are no tax deadlines this summer, whereas last year we had a July tax deadline. July is usually my favorite month to be a tax accountant, so I’m happy to have it back.
Ben: I’m shocked it’s not April, but I guess we each enjoy different things. Today, we are here to talk about what the IRS calls the “dirty dozen.” This is a list they put out every year that’s the items they’re looking at, things they want taxpayers to be aware of, or just things of that nature. But it’s got items that will really impact taxpayers across the entire income scale. So from low income to incredibly wealthy individuals, as well.
Candace: The list is broken down into four main categories. The first one we’re going to talk about is pandemic-related scams. Obviously, very specific to 2020 and 2021. The first item would be the economic impact payments, or what we would call stimulus payments. Over the past 15 months or so there’s been three different rounds of these, and now, as we talked about on our last podcast, there’s advanced payments of the Child Tax Credit. Each of the rounds of stimulus is calculated a little bit differently based on different income thresholds. Some people get their checks on paper, some people are getting direct deposits, some people are getting a little bit of both. All of that has led to a lot of confusion, understandably. But because there’s a lot of confusion, it’s also ripe for scammers to be able to prey on people’s lack of understanding of what’s going on. You’re seeing scammers who will contact clients or taxpayers and say that they want to talk to them about their payment, or they want to make sure that they get it, and they’re asking for financial information.
This is where we’ll start, a theme that you’ll hear over and over again today. The IRS will never initiate contact with you via phone, email, text, definitely not social media, so if you’re getting a call from someone who claims that they’re at the IRS, immediately, you should just assume that it’s not valid. You should delete any messages you get that are saying they’re from the IRS. Don’t open any attachments, anything like that. This is true for the economic income payments, as well as essentially any other time that the IRS is going to contact you. It is possible that at some point you will have a call with an IRS agent and, of course, there’s ways to call them, but they’ll never initiate contact that way. It’s always going to be a letter. For the stimulus payments specifically, the IRS has a website where you can actually go and check the status of them and find out other information. That’s where I would direct everyone to start if you want to double check something or if you have any questions, but if anyone’s reaching out to you about that, you can assume that that is not valid.
The next one that’s specific to the pandemic would be unemployment fraud. Again, we see this sometimes in normal years, but significantly more in 2020. Essentially, when the pandemic first hit, all of the state unemployment offices across the country were just bombarded with claims, rightfully so. They’re trying to balance an overworked system with getting money to the people who need it as soon as possible. That’s always a difficult balance. The information you need in order to file for unemployment is sometimes personal data the scammers already have access to. We’re seeing a lot of false claims being sent through state departments of labor. Someone filed an unemployment claim on my behalf, I was notified by our HR rep. I’m pretty sure I still work here, but I could be wrong. Just doing this podcast for fun, I guess.
We saw these all over last year. They’ve slowed down a little bit in 2021, but essentially, the way that you’re going to see… If you aren’t notified by your HR that this claim has been filed on you, what you might see earlier in 2021 was a form 1099-G. What that is is basically like any other 1099 you receive related to your taxes that shows the total income that you should report on your tax return. We had clients receive these saying, “I got this, but I didn’t actually file unemployment and I definitely didn’t receive any unemployment benefits.” That’s a tip off that there was a claim filed under your name that was not valid. Two things to know about that. One, reach out to the state department and try to get a corrected version, or at least let them know that that was not accurate that that claim was filed.
Then two, do not report that income on your tax return. If it was not income you actually received, then you should not be reporting it. Don’t panic that it’s wrong, but just do not include it and try to get a corrected form issued by your state agency. With the pandemic, lots of opportunities for scammers to confuse people or file stuff on their behalf. Ben, next category is unsuspecting victims, not dissimilar from what I was talking about.
Ben: I was just saying, a lot of these are similar in the intent on what the person’s trying to do to a taxpayer, but aren’t necessarily specific like stimulus payments and unemployment fraud. One of the big ones, which is unfortunate that we’re seeing, is the rise and the uptake of a fake charity. Obviously, with the pandemic, a lot of charitable organizations still are in more need of the support than normal, but it was also resulting in people basically trying to attempt to defraud people by calling and soliciting donations. The first thing we always tell people, and as a lot of people who donate will know, is once you donate to one organization, a lot of times you’ll start to get more unsolicited donation requests, so consider how they’re contacting you. It’s pretty uncommon to get a cold call or a random phone call from an organization asking for money. They’re making it sound very urgent in need.
Any organization that’s charitable, you should be able to ask… Or if you’re suspicious about it, ask for the full name of the organization, the website, and the contact information to be able to get back in touch with them after you’ve researched it. If they are very insistent or they’re trying to pressure you to make the donation immediately, that’s normally going to be a tip-off that maybe it’s not valid. If you’re very concerned about i