IRS Launches Initiative to Combat Growing Number of Tax Scams

The joint effort comes as the number of identity theft cases confirmed by the IRS increased by a significant amount in the 2024 filing season.

The Internal Revenue Service building in Washington on Jan. 4, 2024. Madalina Vasiliu/The Epoch Times

The IRS announced a new coalition with members of the tax industry on Aug. 16 in an effort to counter the growth of scams threatening tax systems and taxpayers.

The new Coalition Against Scam and Scheme Threats (CASST) initiative was convened at the request of IRS Commissioner Danny Werfel.

“[It will] work to expand outreach and education about emerging scams, develop new approaches to identify potentially fraudulent returns at the point of filing and create infrastructure improvements to protect taxpayers as well as federal, state and industry tax systems,” the IRS said in an Aug. 16 statement.

The agency has reported a rising number of identity theft cases. In the 2024 filing season, the IRS confirmed 15,242 instances of fraudulent returns, indicating that they were filed by scammers to claim refunds owed to other people. The agency prevented the issuance of more than $180 million in refunds related to these returns.

The 2024 number was more than 20 percent higher than the number of confirmed identity theft cases during the 2023 season.

Additionally, the IRS’s Identity Theft Victims Assistance unit received 294,138 reports of identity theft in fiscal year 2023, according to a report by the Taxpayer Advocate Service. This is the second-highest in five years and a more than 217 percent increase over fiscal year 2019.

“[The CASST task force will] better protect taxpayers from falling prey to unscrupulous actors by leveraging multilateral relationships across the tax ecosystem to minimize the filing of fraudulent tax returns,” the IRS stated.

In addition to the IRS, other members of the joint effort include the Federation of Tax Administrators, which represents state tax agencies; national tax professional organizations; and leading tech firms operating in the tax industry.

Groups such as the American Coalition for Taxpayer Rights and the National Association of Computerized Tax Processors have announced their support for the program. In total, the joint effort has the backing of more than 60 different groups from the private sector.

The joint effort aims to put in new protections by the 2025 filing season to prevent taxpayers from being scammed. The group will work to make structural changes to improve the ability to spot and stop the scams.

This includes improving preparer tax identification number (PTIN) and electronic filing identification number (EFIN) validation along with steps to counter “ghost preparers,” referring to fake tax preparers who encourage people to claim credits and benefits for which they don’t qualify. They charge a hefty fee from taxpayers and then disappear after the return is prepared, leaving taxpayers to deal with the consequences of incorrect claims.

Scamming Taxpayers

Over the past months, the IRS has issued warnings about several scams targeting taxpayers. In April, the agency issued an alert about fake charities seeking donations from unsuspecting people.

“We see repeated instances of scammers using major disasters as a way to prey on well-meaning taxpayers. In these tragic situations, many people want to help, but con artists too frequently come in posing as charitable groups to take advantage of the situation, stealing money and personal information,” Werfel said.

“People should remember it’s important to never feel pressured to give donations immediately. They should do some research and only donate to clearly established charities that help victims.”

Some scammers make use of the IRS’s offer in compromise (OIC) program to mislead taxpayers. OIC is an initiative aimed at helping taxpayers who cannot pay federal tax debts.

Many taxpayers are applying for the program after being pushed into it by scamsters who charged excessive fees for their services, according to the agency.

Earlier in March, the IRS warned taxpayers about phishing scams designed to steal their personal information. Identity thieves are attempting to trick taxpayers into clicking online links that entice them to submit private information or download malware to their systems.

The agency warned people to not click on any unsolicited communication claiming to be from the agency because it could load malware onto their computers and steal information.

Additionally, there were scams that encouraged taxpayers to apply for refunds for which they were not eligible. For instance, some taxpayers were found to be claiming fuel tax credits that are only applicable for certain business activities such as running a farm or purchasing aviation gasoline. And some taxpayers were found to have created fictional household employees to claim refunds.

“The IRS has seen hundreds of thousands of dubious claims come in where it appears taxpayers are claiming credits for which they are not eligible, leading to refunds being delayed and the need for taxpayers to show they have legitimate documentation to support these claims,” the agency stated.