Academic journal article Journal of Accountancy

Keeping Client Information Safe in an Age of Scams and Security Threats: A Look at the Dirty Dozen Tax Scams and Ways to Protect Taxpayer Information

Academic journal article Journal of Accountancy

Keeping Client Information Safe in an Age of Scams and Security Threats: A Look at the Dirty Dozen Tax Scams and Ways to Protect Taxpayer Information

Article excerpt

With the first part of the 2017 filing season over, many practices are turning to their to-do lists of upgrades and enhancements requiring attention before the next busy season. Assessing security is likely to be high on many of those lists. The IRS's annual reckoning of the top 12 tax scams, many of them security related, provides a helpful framework for evaluating threats firms and their clients may face.

To get started on an evaluation of potential risks, this report offers a quick guide to the IRS's Dirty Dozen most egregious scams along with checklists to help bolster efforts to protect client information. Moving up the list to the No. 1 scam was phishing, which has affected tax preparers, company payroll and human resources departments, and individual taxpayers over the past year. Second was phone scams, which involve fraudsters impersonating the IRS, calling and threatening people to get them to pay amounts they may not even owe, and often asking for untraceable forms of payment. And tax-related identity theft remains a significant concern.


Phishing schemes, which involve fake email or websites that trick taxpayers or practitioners into giving personal information (such as Social Security numbers, credit card numbers, or bank account numbers) and login or password information, lead the list of tax scams for 2017. Be wary about clicking on any attachments or links in emails. Taxpayers and tax practitioners who receive a suspicious email should send it to The IRS, state tax agencies, and the tax industry launched a public awareness campaign called Protect Your Clients; Protect Yourself to warn tax professionals, offer tips, and compile alerts. More information about the campaign is available at


The IRS says receiving aggressive and threatening phone calls from criminals impersonating IRS agents is a major threat to taxpayers. The Treasury Inspector General for Tax Administration (TIGTA) reports having become aware of more than 10,000 victims who have collectively paid more than $54 million as a result of phone scams since October 2013. During filing season, the IRS generally sees a surge in scam phone calls that threaten police arrest, deportation, license revocation, and other things. Taxpayers should guard against all sorts of con games that arise at any time and pick up during tax season. Tax preparers can educate their clients about the fact that the IRS usually initiates contact with taxpayers by mail, not by phone, and says it would never threaten any of those things when attempting to collect taxes. Some scammers alter caller ID numbers to make it appear as if the IRS or another agency is calling. The callers use IRS employee titles and fake badge numbers to appear legitimate. They may use the victim's name, address, and other personal information to make the call sound official.


Tax-related identity theft, together with what the IRS calls the related scams of stealing personal and financial data from taxpayers or data held by tax practitioners, remains a top concern, although the IRS says it is making progress. In 2016, the number of taxpayers reporting stolen identities on federal tax returns fell by more than 50%, with nearly 275,000 fewer victims. The Security Summit Partners, consisting of the IRS, state tax agencies, and the tax preparation industry, have applied more safeguards against this crime this year and say they will continue to step up their efforts. The annual tax preparation software survey conducted by the JofA and The Tax Adviser found that for the 2016 tax preparation season, 59% of CPA tax practitioners said one or more of their clients were victims of tax identity theft during the year. That percentage was down slightly from the 63% of respondents who answered the question the same way in 2015.


The IRS warns taxpayers to be careful to avoid unscrupulous tax return preparers. …

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