March 2025 - Monthly Newsletter

The IRS has just finished rolling out its annual 2025 “dirty dozen” list, which warns the general public about the latest and most dangerous tax schemes. The list generally consists of two types of schemes - those aimed at taxpayers and those aimed at the IRS. As in past years, it is important for U.S. expats to stay informed and vigilant in order not to participate or fall prey to any of these scams.

1. Credits for Sick Leave and Family Leave:

This specialized credit is available for self-employed individuals for 2020 and 2021 during the pandemic; the credit is not available for later tax years. The IRS is seeing repeated instances where taxpayers are using Form 7202 to incorrectly claim a credit based on income earned as an employee and not as a self-employed individual.

2. Bogus self-employment tax credit:

Social media advice continues to circulate about a non-existent “Self-Employment Tax Credit” that’s misleading taxpayers into filing false claims. Promoters market it as a way for self-employed people and gig workers to get big payments for the COVID-19 pandemic period. Similar to misleading marketing around the Employee Retention Credit, there is inaccurate information being circulated that suggests many people qualify for the tax credit and payments of up to $32,000 when they actually do not.

3. 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.

4. The overstated withholding scam:

This is a recent scheme circulating on social media encouraging people to fill out Form W-2, Wage and Tax Statement, or other forms like Form 1099-NEC and other 1099s with false income and withholding information.

In this overstated withholding scheme, scam artists suggest people make up large income and withholding amounts as well as the fictional employer supplying those amounts. Scam artists then instruct people to file the bogus tax return electronically in hopes of getting a substantial refund due to the large amount of fraudulent withholding.

If the IRS cannot verify the wages, income or withholding credits entered on the tax return, the tax refund will be held pending further review. Taxpayers should always file a complete and accurate tax return. They should only use legitimate information returns, such as an employer issued Form W-2, to complete returns correctly.

5. Unscrupulous tax return preparers

Taxpayers 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 dotted line. 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.

6. Online account help from third-party scammers

Scammers pose as a third party and offer to help create an online account on the IRS.gov website. They will try to steal a taxpayer’s personal information this way.

7. Offer In Compromise (OIC) Mills

Those having trouble paying their taxes should avoid anyone claiming they can settle tax debt for pennies on the dollar, known as OIC mills.

8. Social Media: Fraudulent form filing and bad advice

Social media can circulate inaccurate or misleading tax information, for instance involving common tax documents like Form W-2 or more obscure ones. These schemes encourage people to submit false, inaccurate information in hopes of getting a refund. Taxpayers should always remember that if something sounds too good to be true, it probably is.

9. Spear Phishing Attacks

Spear phishing is an email scam that attempts to steal a tax professional’s software preparation credentials, allowing the thieves to steal client data and tax preparers’ identities in an attempt to file fraudulent tax returns for refunds.

10. Phishing and Smishing

This involves fake communications from those posing as legitimate organizations in the tax and financial community, including the IRS and the states. Messages arrive in the form of an unsolicited text (smishing) or email (phishing) to lure unsuspecting victims to provide valuable personal and financial information that can lead to identity theft.

11. False Fuel Tax Credit Claims

The fuel tax credit is meant for off-highway business and farming use and, as such, is not available to most taxpayers. However, unscrupulous tax return preparers and promoters are enticing taxpayers to inflate their refunds by erroneously claiming the credit.

12. Fake Charities

Scammers set up fake organizations to take advantage of the public's generosity. They seek money and personal information, which can be used to further exploit victims through identity theft.