IRS releases 2025 'Dirty Dozen' tax scams: A comprehensive guide for taxpayers
The Internal Revenue Service (IRS) has issued its annual "Dirty Dozen" list for 2025, highlighting the most prevalent tax scams that pose significant threats to taxpayers, businesses, and tax professionals.
Awareness of these schemes is crucial to safeguard personal and financial information during the tax season and beyond.
Overview of the 'Dirty Dozen' tax scams
Each year, the IRS compiles the "Dirty Dozen" list to alert the public about common tax-related scams. These schemes often peak during tax filing season but can occur throughout the year.
They range from identity theft and phishing attempts to abusive tax avoidance strategies. Recognizing these scams is the first step toward prevention.
Common tax scams to watch out for
Phishing and smishing schemes
Phishing involves unsolicited emails or messages that appear to be from legitimate sources, such as the IRS, aiming to steal personal information.
Smishing is a similar tactic using text messages. Taxpayers should be cautious of unexpected communications requesting sensitive data and avoid clicking on suspicious links.
Fake charities
Scammers often create bogus charities to exploit the goodwill of taxpayers, especially following major disasters.
It's essential to verify the legitimacy of charitable organizations before making donations to ensure contributions reach intended recipients.
Also read – Tax deductions for charitable donations
Return preparer fraud
Some dishonest tax preparers commit fraud by inflating refunds or charging fees based on the refund amount.
Taxpayers should choose preparers carefully, ensuring they have valid credentials and a Preparer Tax Identification Number (PTIN).
Inflated refund claims
Be wary of preparers who promise large refunds without examining your records. Such schemes can lead to penalties and interest charges for the taxpayer.
Falsely padding deductions on returns
Overstating deductions or expenses to reduce tax liability is illegal. Taxpayers should provide accurate information and maintain proper documentation to support their claims.
Abusive tax shelters
These are complex schemes that promoters market to avoid paying taxes. Participation in such shelters can lead to significant penalties.
It's advisable to consult reputable tax professionals before engaging in any tax shelter arrangements.
Falsifying income to claim credits
Some individuals falsely report income to qualify for tax credits, such as the Earned Income Tax Credit (EITC).
NB! This fraudulent activity can result in repayment of the credit with penalties and interest.
Frivolous tax arguments
Promoters of frivolous tax arguments encourage taxpayers to make unreasonable claims to avoid paying taxes.
The courts consistently reject these arguments, and participants may face substantial fines.
Offshore tax avoidance
Hiding income or assets in offshore accounts to evade taxes is illegal. The IRS continues to focus on identifying and prosecuting individuals engaged in offshore tax evasion.
Identity theft
Tax-related identity theft occurs when someone uses your Social Security number to file a tax return and claim a fraudulent refund.
Protect personal information and monitor financial accounts to detect unauthorized activity.
Fake payments with repayment demands
Scammers may trick taxpayers into believing they received a refund and then demand repayment, often through unconventional methods.
Always verify the legitimacy of such claims directly with the IRS.
Payroll and HR scams
Cybercriminals target payroll and human resources professionals to steal personal information or payroll funds.
Businesses should educate employees about these scams and implement verification procedures.
How to protect yourself from tax scams
- Be vigilant: Scrutinize unsolicited communications, especially those requesting personal or financial information.
- Verify legitimacy: Confirm the authenticity of charities, tax preparers, and any unexpected correspondence claiming to be from the IRS.
- Secure personal data: Use strong passwords, enable two-factor authentication, and regularly monitor financial accounts for suspicious activity.
- Report scams: Notify the IRS and relevant authorities if you encounter or fall victim to a tax scam.
Bottom line
Staying informed about prevalent tax scams is essential for protecting yourself during the tax season.
By recognizing the tactics used by scammers and taking proactive measures, taxpayers can safeguard their personal and financial information against these threats.