Talking tax scams before we get to the filing season

0:00 The information contained in this podcast is intended for informational purposes only and is not a substitute for individual professional legal advice. The podcast information was carefully compiled from vetted sources and references. However, Rose Resources Outreach to safeguard the elderly cannot guarantee that you will not fall victim to a scam. Let's talk about scams. It's the must-listen show for anyone who wants to protect themselves and their loved ones from scams. Every Tuesday at 8 a.m. Pacific Time on K4HD Radio, Joyce Petrowski, founder of Rose, and her guests will provide valuable insights and practical tips on how to recognize and protect yourself from scams. And now, here is your host, Joyce Petrowski.

0:49 Good morning, everybody. My name is Brian Watson, and I have the pleasure of filling in for Joyce today. Joyce was supposed to be here today, but an offer came up to do a Rose-related event this morning, and she asked if I could fill in. I said, absolutely. I love filling in. So today on Let's Talk About Scams, we are going to talk about taxes. Now, don't turn off the show right now. I get taxes aren't super exciting. exciting, but it's very important. So we're going to talk taxes now, even though it is October 27th. So the title of today's show, talking tax scams before we get to filing season, because once you get into filing season, things get a little busy and crazy. Now is a good time to just talk about some of these topics. So My background, I spent 28 years working for the IRS. I was an IRS special agent. I'm a certified public accountant in California, even though I've allowed my licenses inactive. I passed the exam, but I'm not a practicing CPA. And when I was an IRS special agent, we did criminal cases and And I also was a public information officer. So I spent a lot of my time warning the public about various scams and also doing some outreach and education so that people had good information and they were prepared. I actually met Joyce when I was still working for the IRS

2:20 and she interviewed me a couple of times for Rose. And if you go back on our website, you can find those early interviews from about four years ago. So that's actually how I met Joyce, by being a guest on basically the precursor of our radio show. Joyce would do videos and post them to the roseadvocacy.org website. So tax season starts in January. Like I said, it is a good time now to talk tax-related scams. So the first one I want to talk about is There was something called the IRS impersonation scam. It started in 2013, and people were called by phone, and they said, you owe the IRS money. And the person claimed to be an IRS employee, and they said, you need to pay immediately.

3:15 And they always wanted people to pay with a preloaded debit card or wire transfer. Um, and then at one point they were asking for, um, iTunes cards as crazy as that may sound. Scammers just want funds that they can accept and get transferred to them and then move along. Um, so in the IRS impersonation scam, you were told there's a warrant out for your arrest. You need to pay right now. And if you refuse to cooperate, the police would come to your house, take you to jail. The scammers also threatened deportation or suspension of driver's licenses. And in a lot of the cases, the caller became hostile and insulting. It was very high pressure. And then here's the deal. Let's say you hung up on them, like we tell you to at Rose. You know, when you get a call and it's a scammer and you hang up, these scammers would call back and the caller ID would have the name of the local police department or sheriff's department.

4:15 And they would say, this is officer so-and-so from the Phoenix Police Department. We have a warrant for your arrest. The IRS just sent it over. Here is your last chance to pay. How scary is that? And then when this scam first started, it was very interesting. At first, they were calling people who were new to the United States, fairly recent immigrants. I had some friends who were both born outside of the United States, and they were the first people that I knew that received this call. And they were very scared, like anyone would be. But then eventually, like any scammers, they just start calling everybody. And at one point, I was an IRS employee, and the scammers called me up. on my government issued cell phone and said they were the IRS and then I owed money.

5:08 And then I played along a little bit and said, that's interesting. I worked for the IRS. What's your ID number? And then of course they hang up, hung up. So how big was this scam? Um, They've documented over $ 72 million that was lost. Luckily, this scam started 13 years ago. It's pretty much on the wane. There's new versions of it. We'll talk about that. But let's say it's $ 72 million. It could be 10 times that amount because with scams, we know that people under-report. So now the IRS impersonation scam has kind of left the phone scam realm and it's definitely moved over into email and text messaging, which the scams that we talk about all the time are phishing and smishing. So scammers will send emails, direct messages, VMs, or texts that appear to be from the IRS. And they will... Send QR codes. They'll send people links to IRS websites to verify for personal information. Delete this stuff.

6:17 The IRS does not send emails and text messages. That's just not how the IRS works. In 2025, last year, the IRS reported over 600 social media posts impersonators use doing this scam. So as a reminder, never click on unsolicited communication claiming to be from the IRS because also even if you don't provide personal information, um, they may install malware, malicious software on your computer. So we never clicked on links unless we're absolutely sure. Um, and you know, Once that gets on your computer, that software, it could be ransomware. It could prevent you from getting files. It could do a keystroke tracker, all these really bad things.

7:06 So here's the thing to remember with IRS communications. They're not going to call you. They're not going to email you. They're not going to text you. If the IRS needs to get a hold of you, the IRS will send a letter to you, okay? And then you can read the letter, and then you can talk to someone if you have to, or they may be just asking for some documents to verify something. All right. Next IRS related scam relates to offers in compromise. So you might have, you might hear the commercials on TV. I settled with the IRS pennies on the dollar. I owed 20,000 and I paid 2000. So yes, the IRS does have a program called offer and compromise. And IRS realizes at some point, People just get into a big hole with their taxes.

8:00 So kind of think of it as tax bankruptcy. Something bad happens, a business fails, someone has a death in the family, a cancer, and they get way behind, and they're never going to be able to pay it back. So taxpayers can put in an offer and compromise. and you basically lay out all your financial information, your assets, your liability, your income, and the IRS will review it. And some are accepted, most are not. Most are not accepted because people have other assets or they have future earning potential. But let's say you're 85, 90 years old, you're on a fixed income, you don't own your house, there's a good chance you might get the offer in compromise.

8:47 But if you're 40 years old, you're healthy, you own your house, it's not going to happen. Well, here's where the scam is. There are companies out there that are very aggressive in marketing this offer in compromise, and they make promises they can't fulfill. And they'll charge you a lot of money, and it's just a waste of money. They can look at your information ahead of time and likely know that you won't be approved. but you may spend thousands of dollars applying for this offer and compromise and it'll just get rejected. So my advice is if this might be something you think you might qualify for, have a discussion with your certified public accountant or paid return preparer, but make sure they have experience in offer and compromise. not someone who doesn't know what they're talking about. Also, you can just do it yourself. You can go to irs.gov, look up offer and compromise, and you can apply yourself.

9:46 All right. Next thing I want to talk about is return preparers, and more specifically, return preparer fraud. Here's an interesting statistic. About 57% of taxpayers choose to get their tax returns prepared by a paid preparer. Why? Taxes are complicated. I mean, there are some people I know that won't even start a tax return. They think it's in a foreign language. And I get it. I mean, I've prepared my own tax return since I was 15 years old. So four years of tax prep, I've gotten pretty good at it, but there's some great software programs out there where you just follow the instructions and it puts your information in. But if you do have a complicated tax situation, it actually benefits you from using a paid prepare because they can get you all the deductions and credits that you're entitled to. So of the 57% of Americans who hire paid prepares, I will tell you the vast majority of these return preparers are honest and ethical. They do a really good job, but unfortunately, like anything in life, there's always exceptions. And what I learned in 28 years with the IRS, there are some shady tax return preparers out there who intentionally file false tax returns. And before I get that, I have one more stat I want to tell you. It's also interesting. that 95% of individual

11:19 tax returns are now filed electronically. We're getting away from the paper and pencil and pen and handwriting them. Those are tedious. There's a lot of mistakes. It's so much better doing it online, whether you do it yourself or with a paper pair. 95% of individual returns are now filed electronically. All right, getting back to what we're talking about. So the IRS, My branch of IRS, IRS criminal investigation, we actually would do criminal investigations on tax return preparers. We wouldn't go after their clients. We wanted their clients to be witnesses. And in some cases, we actually looked at them as victims. Sometimes we looked at them as willing co-participants. But when we did these criminal cases against return preparers, we focused our energy and our time on recommending prosecution on the return preparers. So just to give you an example of one, back in 2019 in Tucson, Arizona, a gentleman by the name of Joseph Vosburgh was sentenced to 18 months in prison, and he was ordered to pay over $ 200, 000 in restitution. This is what he did, and this is what made it criminal. He would suggest the creation of fictitious businesses that to his clients so that they could claim some losses on their tax return.

12:47 And it was absolutely amazing how many of his clients had a business listed on their tax return, and it would be under what we call Schedule C, and a great percentage of them were photographers. I didn't know there were that many professional photographers in Tucson. But he would say to them, do you take pictures? Yes. Well, you're a photographer. And then he would report a little bit of income, but then just put all these crazy expenses on there. So why would you create a Schedule C loss? Well, when you have a loss on a fake business, that is aggregated with your other income, and it brings your total income down. you're going to pay less taxes. That's why they do it. And he also, Mr. Vosburgh, collected expense receipts from clients like gas receipts, restaurants, travel, things like that. And if one of his clients was audited, he had this whole stash of false or all these expenses that he could turn over and including charitable deductions and things like that. He had like a bank of receipts.

14:00 So that's pretty shady. And then here's the other thing I want to talk about. There are some return preparers out there who on a schedule C for their client actually report fake profit. They, a profit that doesn't exist income. Why would they do that? Well, the IRS has something called the Earned Income Tax Credit. And I don't want to get into it too in-depth, but it basically rewards people for working. And the criminals have figured out if you report a certain amount of money, you can get a big refund. So if you ever go to a return preparer and there is a Schedule C for a business that does not exist or that the numbers are completely fabricated, you need to walk out the door. Do not let that return be filed. So I know I've scared you a little bit about return preparers. Let's focus on the positive. How do you choose a good one? Well, ask your friends, your family, your neighbors. Think of it this way. If you moved into a new town and you needed a doctor or a dentist, would you just...

15:12 go online and pick the first one that showed up in your search online? No, no. You ask people you trust. Hey, I'm new in town. I need a dentist. Do you have a good dentist? Oh, yeah. Dr. Smith. He's the best. I love him. All right. I'm going to go to him. So that's the same way with a return preparer. So a couple of red flags I do want to talk about with return preparers is you want to avoid any return preparer who bases his or her fee on a percentage of your refund. Well, you might think, well, that's fair. They're only asking for 10 or 20%. But here's the problem. If their fee is based on a percentage of your refund, there's a built-in incentive for them to pad your return with false items to increase that refund. So that is a big problem.

16:05 A return preparer should base their fee on how much time it takes for them to prepare a return, how complex it is. And then also avoid any return preparers who claim they can get a larger refund than any other return preparer. They're just trying to get you in the door. Don't go for it. It's going to cause headaches later on. There might be an IRS audit, just issues. Don't do that. There is a recent case I do want to highlight. And this was from probably about a month ago. A Tucson income tax preparer was found guilty of filing 22 false federal income tax returns. So this happened in Tucson. A lady named Darlene Musgrove was found guilty of the 22 counts. The case went to trial, actually sat in for a little bit of the trial because it was in downtown Tucson. At trial, 12 of her clients testified that they did not have the deductions that she included on their tax returns and were not aware of the false deductions. These clients also testified that the refunds they received when Ms. Musgrove prepared the returns were larger than they had received in the past. So why would they do that? Why would she do that?

17:25 Why would She's not the one getting the money. It's the clients getting the money. Well, the government's argument at trial was that her intent, Ms. Musgrove's intent, was to acquire larger refunds for her clients so she could get repeat business and then word of mouth. Think about it. If you get a big refund, you're going to tell your family and friends, oh, I went to this new return preparer and I got a huge refund, way more than I got in the past. That gets more people in the door. And also when you pad the return with extra forms and false deductions, she can charge more. So she has not been sentenced yet. That'll happen sometime in 2027. All right, next thing I want to talk about is something that when I was at the IRS, we called ghost preparers. So anybody can be a return preparer.

18:19 You don't need a college degree or a CPA license or be an attorney or anything like that. Anyone can be a return preparer, but there are a few rules. Anyone that's paid has to have a valid... prepare tax identification number p10 you apply and get one with the irs and you have to put it on the return and you have to put your name on there too if you're paid we call but there are return preparers out there who get paid to prepare returns but won't put their name name on it for a variety of reasons we call them ghost preparers why because when tax season is over they disappear so um Kind of corny, but it works. It helps us to review it. So getting back to the positive, what should a quality return preparer do? Hopefully, when I describe these traits, this is what your current preparer does. If they don't, maybe it's time to go somewhere else. But a good return preparer will review your records and receipts. They will ask for your W-2, your 1099s, your expense receipts and deductions. Instead of just asking for estimates, you know, they would want the actual numbers, okay? They would meet with you either in person or online and conduct a detailed interview. Ask about life changes. Did you get married? Do you have children?

19:44 Did you get a new job? New streams of income? Talk about different deductibles. and things like that. A good return preparer is going to stay updated on tax laws. Tax laws are complicated and they're always changing. And you want to make sure that they know all this stuff before the tax season starts. You'll get all the deductions you're entitled to, and there'll be less errors. A good return preparer will also offer that electronic filing that I talked about earlier. E-filing is great because there's less errors. And here's the best part. You get your refund extremely fast, way faster than if you did it by mail. A good return preparer will review the return with you. either online, Zoom, Teams, something like that, or in person. They'll walk you through the return so that you understand what's on the return because it is your return that you are signing. And always be very leery of any return preparer who asks you to sign a blank tax form. That's a huge no-no.

20:55 And then after they've reviewed it with you, you need to get a copy of it. either a printed copy or a digital copy emailed to you. Every return preparer will do that. Good return preparers will use encrypted software or a portal when they share information with you so your data is not lost, there's no data breaches. And a good return preparer is available year-round, not like one of these ghost preparers. But a good return preparer is available in the summer and the fall and the winter. Let's say you do get an inquiry letter from the IRS. they would be available to help you out and reply to the IRS. And that's what a good return preparer will do. So if you're interested in more tax scams, you can go to irs.gov and search dirty dozen. Every year during tax season, the IRS puts out a list called the dirty dozen. They're the 12 most egregious tax-related scams.

21:55 Return preparer fraud is always on there. Um, but every year there's some changes and new stuff, but check it out if you want to learn more. Um, and if you want to know more about our nonprofit rose advocacy.org, please go to our website. You can sign up for our mailing list. Um, it's basically an email list. We'll send you an email at the beginning of each month. And then every Tuesday morning, we send you a little mini mini version of, um, just one little thing with scam prevention online. It's not a topic that most people look forward to talking about, but it's so important that we talk about scams all the time, just so it's fresher in your mind, in our minds, so that when you do get that IRS impersonation email, you recognize it right away and you're mentally prepared to act. We don't live in fear, but we need to have a healthy level of skepticism to protect ourselves. And that way we can protect our money of our own money and the money of our loved ones. Because at Rose, we are in the prevention business and we don't want anyone to be scammed. So if you like today's podcast, our radio show, please share it. It'll be available online at letstalkaboutscams.com. Or you can go to our website, roseadvocacy.org. Share it with a friend. Like I said, Talking tax scams before we get to the filing season is important because once filing

23:27 season starts, you're kind of in the thick of it and things get a little bit crazy. Appreciate everyone tuning in today. See you all next week. Joyce will be back. And thanks for tuning in. Bye-bye. Well, that's all the knowledge for this episode. Tune in every Tuesday at 8 a.m. Pacific time on K4HD Radio at K4HD. com as Joyce explores a variety of knowledge so you have the power to make scam protection your healthy habit. And until then, feel free to reach out to Joyce and let's talk about scams.