08 JUL 2024 / IRS UPDATES

IRS Scams Tax Professionals Should Watch Out

In today’s insight, we explore the growing threat of IRS scams targeting tax professionals and provide tips on how to safeguard against these malicious schemes.

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The Story

Imagine you’re in the midst of a busy day, and the phone rings. It’s one of your senior citizen clients, sounding worried. They explain that they received a call from someone claiming to be from the IRS, insisting they owe back taxes and threatening legal action if immediate payment isn’t made.

This scenario highlights a disturbing trend: scammers targeting older adults under the guise of government officials, including the IRS. These fraudsters employ tactics of fear and deception, preying on the vulnerability of seniors to extract sensitive personal information and money.

IRS Commissioner Danny Werfel warns, “Scammers often target seniors, attempting to steal personal information through phone calls, emails, or text messages by pretending to be from the IRS or other agencies or businesses.” The goal is to exploit trust and create urgency, coercing victims into divulging financial details or making hasty payments.

Protecting seniors from these scams requires vigilance and awareness. As a tax professional, it’s crucial to educate your clients, especially older adults, about these deceptive practices. By empowering them with knowledge and encouraging them to verify the legitimacy of unexpected communications, you can help safeguard their financial security and peace of mind.

Some of the common threats of recent times include...

The most common one is phishing emails. These sneaky messages often look like they’re from the IRS or a related organization, asking for sensitive information or directing you to a fake website.

Fun Fact: Did you know the term “phishing” was coined by hackers in 1996 when they were stealing America Online accounts and passwords?

Next up is spear phishing. This is a more targeted scam where fraudsters use personal information to trick you. For example, they might mention a recent tax conference you attended to make the email seem legitimate.

Then there's ransomware. This nasty software locks your files and demands a ransom to unlock them.

Did You Know? The first known ransomware attack happened in 1989, and the hacker's demanded payment in cashier’s checks.

Lastly, we have data theft. Scammers aim to steal client data from your system, which they can then use to file fraudulent tax returns.

Now that you know the threats, how can you defend against them?

Start by using Strong Passwords. Ensure all your passwords are robust and unique. Consider using a password manager. Password managers like 1Password or bit warden can be used to manage it easily.

Enable Multi-Factor Authentication (MFA). It adds an extra layer of security by requiring two forms of verification. You can choose the method you want—for example, SMS with OTP, an authenticator app, or a hardware token. Some of the well-known MFA apps include Microsoft Authenticator, Duo Security and Google Authenticator.

Always consider factors such as ease of use, compatibility with your existing systems and software, scalability, and regulatory compliance requirements (e.g., IRS guidelines). Many tax software providers and cloud service platforms offer built-in support for specific MFA methods, making it easier to implement and manage security across your practice.

Regularly update your software. Keep your software and systems updated to protect against vulnerabilities. Be Wary of Unsolicited Communications. Because the IRS never initiates contact via email or social media to request personal information.

Educate your staff as well. Conduct regular training on recognizing and responding to potential scams.

Don’t forget to educate your clients about the scams.

It is crucial to keep clients updated on the latest scams targeting taxpayers to maintain their financial security. One effective method is to integrate discussions about IRS scams into client meetings. For instance, professionals can dedicate a portion of their meetings to highlighting prevalent scams and providing practical advice on recognizing and avoiding them.

Another proactive approach is to develop accessible materials such as newsletters or blog posts focused specifically on IRS scams. These resources should be crafted in straightforward language and distributed via email or posted on the firm's website for easy client access.

Organizing workshops or webinars can also be highly beneficial. These sessions can feature case studies of real IRS scam incidents, offering clients a deeper understanding of how scammers operate and practical tips on protecting themselves. Emphasizing that the IRS never initiates contact via email, text, or social media for personal information is critical during these engagements.

Encouraging clients to report any suspicious communications promptly is crucial. This practice not only helps in mitigating potential risks but also strengthens the client-advisor relationship by demonstrating a commitment to their financial security.

By adopting these proactive measures—integrating scam awareness into meetings, developing accessible educational resources, organizing informative sessions, and promoting prompt reporting—professionals can effectively educate and empower their clients against IRS scams. This proactive stance not only enhances client trust but also ensures their financial well-being remains safeguarded from fraudulent activities.

Scams are not just a nuisance; they can have significant repercussions. Tax professionals play a crucial role in the financial ecosystem, and any compromise can have a ripple effect on numerous clients. The IRS is continuously working to combat these threats, but staying informed and vigilant is your best defense.