IRS warns of child tax credit scams


The Internal Revenue Service’s Criminal Investigation division is cautioning taxpayers and tax professionals to beware of scams related to the expanded Child Tax Credit in which fraudsters are trying to steal money and personal information.


The IRS began depositing and mailing millions of advance monthly payments of the Child Tax Credits to parents last week as part of the American Rescue Plan Act, in an effort to reduce the rate of childhood poverty (see story). Under the program, parents are receiving payments of $250 to $300 per child over the next few months through the end of the year. The enhanced Child Tax Credit increased the traditional amount from $2,000 per child in 2020 to $3,600 for each child under the age of six. For each child ages six to 16, the credit has increased from $2,000 to $3,000. The American Rescue Plan also makes 17-year-olds eligible for the $3,000 credit. All that extra money makes the program attractive to identity thieves and scammers.


The IRS CI division warned taxpayers to beware of various phone, e-mail, text message and social media scams targeting families who are eligible for the credit. Any communication offering assistance to sign up for the Child Tax Credit or to speed up the monthly payments is likely a scam. When receiving unsolicited calls or messages, taxpayers should not provide personal information, click on links, or open attachments as this may lead to money loss, tax-related fraud, and identity theft.


“Criminals look at these child tax credit payments as a way to steal from people,” said IRS – Criminal Investigation special agent in charge Albert Childress, according to the Los Alamos Daily Post. “Please don’t reply to any emails or text messages claiming to be from the IRS and don’t share any personal information over the phone. We don’t want anyone to be victimized by scam artists.”


The IRS warned scammers frequently create new schemes to attempt to catch taxpayers off-guard, but taxpayers should be aware that the IRS doesn’t initiate contact with taxpayers through email, text messages, or social media channels to request personal or financial information, even when it’s information related to the Child Tax Credit. The IRS also doesn’t leave pre-recorded, urgent, or threatening messages. Aggressive calls warning taxpayers about a lawsuit or arrest are fake. The IRS also won’t call taxpayers asking them to provide or verify financial information so they can obtain the monthly Child Tax Credit payments, nor will the IRS ask for payment via a gift card, wire transfer or cryptocurrency.


For taxpayers who are eligible for advance payments of the Child Tax Credit, the IRS is using information from their 2020 or 2019 tax return to automatically enroll them for advance payments. Taxpayers don’t need to take any additional action. Taxpayers who are not required to file a tax return or who have not provided the IRS their information, should visit IRS.gov/childtaxcredit2021 to provide basic information to apply for the Child Tax Credit.


The IRS is offering a variety of tools to help taxpayers with the credit through its IRS.gov site, including a portal, an eligibility assistant, and a place where they can update their direct deposit information. The Child Tax Credit Eligibility Assistant tool was recently translated into Spanish, and other multilingual resources have been made available including a step-by-step guide to using the Non-filer Sign-up Tool (Publication 5538) in Spanish, Chinese Simplified, Korean, Vietnamese, Haitian Creole and Russian, a basic You Tube video on the Advance Child Tax Credit in Spanish and Chinese, as well as English, and e-posters in various languages.


Another tool allows taxpayers to opt out of the advance payments. Some tax professionals are advising clients to opt out if they are worried they will have to repay the money next year if their income is miscalculated by the IRS based on their old tax returns.


“You might consider opting out if, for example, you were near the income limits in 2019 or 2020, expect to earn more in 2021, and want to avoid excess payments,” wrote Brendan Walsh, a shareholder at the accounting firm Clark Schaeffer Hackett, in an alert to clients. “Be aware that couples filing jointly must both opt out, otherwise the spouse who doesn’t will receive half of the joint payment. It’s not only a change in expected income that could lead to excess payments; it’s also a change in the number of dependents. For example, divorced couples who share joint custody may alternate the years in which they claim their children as dependents for CTC purposes. If 2021 is your former spouse’s year, consider opting out (your former spouse won’t receive the advance payments based on his or her 2020 tax return but, if eligible, can claim the credit on the 2021 return). Parents of children who will turn age 18 in 2021 also should consider opting out.”


Separately, Senate Finance Committee chairman Ron Wyden, D-Oregon, is urging the IRS to make the Child Tax Credit tools available to mobile device users who don’t have internet access from computers. He sent a letter Thursday to IRS Commissioner Charles Rettig applauding the agency for sending $15 billion in advance payments to the families of nearly 60 million children already, but believes the IRS needs to do more to make the tools more accessible to underserved families.


“Improvements to the IRS Non-filer Sign-up Tool are critical,” Wyden wrote. “The portal is not designed to work on mobile devices, as intended by law, and has not been translated into languages other than English. While I deeply appreciate the tireless work of the dedicated staff at the IRS to quickly stand up this critical resource, I am concerned that technological and design constraints on the portal will prevent America’s most vulnerable communities—those who make so little income they previously did not file—from even applying for this important funding. This is because, as has become all too apparent over the course of the COVID-19 public health and economic crisis, many of the most vulnerable families in this country only access the internet via their mobile devices. Yet, the portal does not account for this reality, and is not optimized to work on mobile devices, or in languages other than English.”

He pointed out that mobile device optimization for consumer-facing government websites is required by law. The Connected Government Act of 2018 requires new and redesigned agency websites to be mobile-friendly.


“While I know the IRS worked with private-sector partners Intuit and the Free File Foundation to build the non-filer portal, which is not hosted on a government domain, the intent of this law is clear,” said Wyden.


He asked if the IRS used contractual requirements to mandate the development of mobile friendly websites with translations into more than just English, and if not, why not, as well as whether an explicit decision was made either by the IRS or its private-sector partners to not create a mobile-accessible website.


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