IRS Releases Its “Dirty Dozen” Tax Scams for 2025: Part 2

This is the second part of a two-part series on tax scams. For part one of this series, please refer to IRS Releases Its "Dirty Dozen" Tax Scams for 2025: Part 1. The IRS compiles an annual list of common tax scams that many individuals/business entities may encounter throughout the year. Below is a summary of several additional common scams and how to be aware of (and prepare for) them.

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1.       Bogus Self-Employment Tax Credit

Misleading advice about a non-existent “Self-Employment Tax Credit” is circulating on social media, prompting taxpayers to file false claims. Promoters falsely advertise it as a way for self-employed individuals and gig workers to receive substantial payments for the COVID-19 pandemic period. Similar to the misleading marketing of the Employee Retention Credit, inaccurate information suggests that many qualify for payments up to $32,000, which is not the case.

In truth, the credit being referenced is not the “Self-Employment Tax Credit” but rather the more limited Credits for Sick Leave and Family Leave. Many do not qualify for these credits, and the IRS is scrutinizing claims under this provision, so taxpayers file at their own risk.[1]

For more information on this bogus self-employment tax credit, click here.

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2.       Improper Household Employment Taxes

Some taxpayers are fabricating household employees and filing Schedule H (Form 1040), Household Employment Taxes, to claim refunds based on fictitious sick and family medical leave wages they never paid.[2]

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3.       The Overstated Withholding Scam

A recent scheme on social media encourages individuals to fill out Form W-2, Wage and Tax Statement, or other forms like Form 1099-NEC with false income and withholding information.

In this scam, fraudsters advise people to invent large income and withholding amounts, along with a fictional employer. They then instruct individuals to file these bogus tax returns electronically, hoping to secure a substantial refund from the fraudulent withholding.

If the IRS cannot verify the wages, income, or withholding credits on the tax return, the refund will be held for further review. Taxpayers should always file accurate tax returns using legitimate information returns, such as an employer-issued Form W-2.

Variations of this scheme involve Forms W-2 and W-2G; Forms 1099-R, 1099-NEC, 1099-DIV, 1099-OID, and 1099-B; as well as the Alaskan Dividend Fund, Schedule K-1 with Withholding Reported, and Unspecified Source of Withholding Credit Claimed.[3]

For more information on this overstated withholding scam, click here.

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4.       Misleading Offers in Compromise

The Offers in Compromise (OIC) program is a valuable tool for settling federal tax debts when full payment is not possible. However, "mills" aggressively promote OICs in misleading ways to those who clearly do not qualify, often costing taxpayers thousands of dollars. Taxpayers can check their eligibility for free using the IRS Offer in Compromise Pre-Qualifier tool.[4]

For more information on misleading offers in compromise, click here.

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5.       Ghost Tax Return Preparers

While most tax preparers offer excellent service, beware of unscrupulous professionals. Warning signs include charging fees based on refund size and refusing to sign the return. Avoid "ghost" preparers who prepare returns but refuse to sign or include their IRS Preparer Tax Identification Number (PTIN) as required by law. Never sign a blank or incomplete return. The IRS advises turning to a trusted tax professional for assistance.[5]

For more information on ghost tax return preparers, click here.

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6.       New Client Scams and Spear Phishing

In 2025, the IRS continues to encounter the "new client" scam, involving spear phishing attempts targeting tax professionals. Cybercriminals pose as potential clients to trick tax professionals into responding to emails. Once engaged, scammers send malicious attachments or URLs that can compromise systems and access sensitive client information.

Phishing involves emails or texts designed to extract personal information, while spear phishing targets specific organizations or businesses. Tax professionals are frequent targets, and successful attacks can lead to stolen client data and identities, enabling fraudulent returns.

Businesses and individuals, including tax professionals, should remain vigilant for suspicious requests or unusual behavior before sharing sensitive information. Warning signs include poorly constructed sentences and unusual word choices. Scammers can exploit hacked email accounts to find genuine emails from previous victims sent to their tax professionals.[6]

For more information on the “new client” scam, click here.‍

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Conclusion

While this is not a comprehensive list of all tax scams, these are common examples of which all taxpayers should be aware. Taxpayers should always be alert and proactive to avoid falling into scams where confidential tax information can be stolen and misused. For more information on how to report abusive tax schemes and abusive tax return preparers, click here.

 Contact Montgomery Legal today to discuss your case and legal options. Schedule a Consultation or call (214) 432-6100.

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[1] Dirty Dozen tax scams for 2025: IRS warns taxpayers to watch out for dangerous threats, IRS, available at https://www.irs.gov/newsroom/dirty-dozen-tax-scams-for-2025-irs-warns-taxpayers-to-watch-out-for-dangerous-threats.

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

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