IRS Dirty Dozen 2026: The 12 Tax Scams Targeting NJ Taxpayers This Filing Season

Every year the IRS publishes its "Dirty Dozen" list of the most prevalent tax scams. The 2026 list includes threats that did not exist two years ago — AI-generated phishing emails that perfectly mimic IRS correspondence, abusive Form 2439 claims that exploded after social media went viral, and Employee Retention Credit mills that are still operating despite billions in fraud already identified. I review the full list every year and add the NJ-specific angles that the IRS national press releases do not cover.

I am writing this during filing season because that is when NJ taxpayers are most vulnerable. You are checking your email for tax documents. You are expecting correspondence from the IRS or the NJ Division of Taxation. You are searching for tax help online. Scammers know this, and they have gotten dramatically better at exploiting it.

This guide covers all twelve scams on the 2026 IRS Dirty Dozen list, with additional NJ-specific warnings about Division of Taxation phishing, NJ identity theft procedures, and ANCHOR program scams that target New Jersey residents specifically. Every protection step is practical and actionable.

In this guide:

1. Form 2439 Abusive Claims (New for 2026)
2. AI-Powered Phishing and Smishing
3. Employee Retention Credit (ERC) Mills
4. Ghost Tax Preparers
5. Fake Charities and Disaster Fraud
6. Social Media Tax Advice and "Free Money" Schemes
7. Spearphishing Attacks on Tax Professionals
8. Offer in Compromise Mills
9. Inflated Refund Claims and Refund Fraud
10. Abusive Tax Shelters and Syndicated Conservation Easements
11. Misleading Tax Debt Resolution Companies
12. Identity Theft and W-2 Scams
13. NJ-Specific Scam Warnings
14. How to Report a Scam
15. FAQ

1. Form 2439 Abusive Claims (New for 2026)

This is the newest entry on the Dirty Dozen list and the one I am most concerned about for my clients. Form 2439 (Notice to Shareholder of Undistributed Long-Term Capital Gains) is a legitimate form used by regulated investment companies (RICs) and real estate investment trusts (REITs) to report undistributed capital gains to shareholders. The shareholder claims a credit for tax already paid by the fund on those gains.

The scam: Promoters on social media and through online ads are coaching people to file fabricated Form 2439 claims for funds they never invested in, reporting fictitious undistributed capital gains tax credits. The claimed credits offset their tax liability dollar-for-dollar, generating large refunds. Some promoters charge a percentage of the fraudulent refund as their fee.

Why it works: Form 2439 is obscure. Most taxpayers and even many tax preparers have never seen one. The credit flows through to Form 1040 in a way that is not immediately flagged by basic e-file validation. The IRS has identified thousands of fraudulent Form 2439 claims filed for 2024 and 2025, and the number is growing.

Red flags:

• Someone offers to "get you a tax credit" using Form 2439 when you do not own shares in a RIC or REIT that issued the form
• A preparer includes Form 2439 on your return without explaining it
• You see social media posts about "free money" from undistributed capital gains credits
• A promoter asks for a percentage of your refund as payment

Consequences: Filing a fraudulent Form 2439 claim is tax fraud. Penalties include the 75% civil fraud penalty under IRC Section 6663, interest on the underpayment, and potential criminal prosecution under IRC Section 7206 (filing a fraudulent return). The IRS has stated it is actively auditing all Form 2439 claims and has referred cases to the Criminal Investigation division.

Protection: Never file a Form 2439 claim unless you received the actual form from a regulated investment company or REIT in which you hold shares. If a preparer suggests it and you do not own qualifying investments, find a new preparer immediately.

2. AI-Powered Phishing and Smishing

Phishing emails and text messages ("smishing") impersonating the IRS are not new. What is new in 2026 is the quality. AI language models are generating phishing emails that are grammatically perfect, correctly reference current tax law provisions (like the OBBBA), include accurate IRS addresses and phone numbers, and mimic the formatting of genuine IRS notices down to the notice number and response deadline.

What has changed:

• AI-generated emails no longer contain the spelling errors and awkward phrasing that used to identify them
• Deepfake voice calls mimicking IRS agents have been reported to the Treasury Inspector General for Tax Administration (TIGTA)
• QR codes in text messages direct to fake IRS payment portals that are pixel-perfect replicas of IRS.gov
• Some phishing campaigns reference specific OBBBA provisions (like the overtime deduction or tip deduction) to appear current and legitimate

How to identify fakes:

• The IRS does not initiate contact by email, text, or social media. Period. The first contact for any tax matter is a letter sent via US Mail.
• Any email claiming to be from the IRS is fake
• Any text message claiming to be from the IRS is fake
• Any phone call demanding immediate payment via gift card, wire transfer, or cryptocurrency is fake
• The IRS will never threaten arrest, deportation, or license revocation by phone

Protection: If you receive a suspicious communication, do not click any links, do not call any phone numbers in the message, and do not provide any personal information. Report phishing emails to phishing@irs.gov. Report phone scams to TIGTA at 1-800-366-4484.

3. Employee Retention Credit (ERC) Mills

The IRS placed a moratorium on processing new ERC claims in September 2023 and has been slowly working through the backlog. Despite this, ERC mills — companies that mass-produce ERC claims for businesses that do not qualify — are still operating in 2026. Some have pivoted to helping businesses "amend" previously denied claims or to filing claims for businesses that never applied.

Current status: The IRS has identified over $2 billion in fraudulent ERC claims. The voluntary disclosure program allowed businesses to return 85% of fraudulent ERC refunds with no penalties. That program has closed. Businesses that received fraudulent ERC payments and did not participate in the voluntary disclosure now face full repayment plus penalties and interest.

NJ angle: New Jersey businesses are especially targeted because NJ's aggressive COVID shutdown orders in 2020-2021 created a genuine basis for some ERC claims. Mills exploit this by claiming that every NJ business qualified for every quarter, which is false. The qualification analysis requires quarter-by-quarter review of actual government orders and revenue decline.

Protection: If you have not already filed an ERC claim, be extremely skeptical of anyone encouraging you to do so in 2026. If you received a questionable ERC refund, consult a CPA or tax attorney immediately. Do not ignore IRS correspondence about ERC audits. For representation, see our IRS audit representation services.

4. Ghost Tax Preparers

A ghost preparer is someone who prepares your tax return but refuses to sign it. Federal law requires paid preparers to sign returns and include their Preparer Tax Identification Number (PTIN). Ghost preparers avoid this to evade IRS oversight, usually because they are inflating deductions, fabricating income, or claiming credits you do not qualify for.

Warning signs:

• The preparer insists on paper filing only (to avoid the electronic signature requirement)
• The preparer refuses to provide a PTIN
• The preparer directs your refund to their bank account rather than yours
• The preparer charges a fee based on a percentage of your refund
• The preparer cannot or will not explain the deductions and credits on your return

NJ-specific risk: New Jersey does not license tax preparers (unlike Oregon, California, Maryland, and New York, which have state-level registration or licensing requirements). Any person in NJ can prepare a tax return for compensation without any education, testing, or registration with the state. This makes NJ especially susceptible to ghost preparers. The only federal protection is the PTIN requirement.

Protection: Always verify your preparer has a PTIN. Ask for a copy of the return before filing and review it for accuracy. Never allow a preparer to direct your refund anywhere other than your own bank account. Check IRS.gov's Directory of Federal Tax Return Preparers to verify credentials. For professional preparation, see our tax preparation services.

5. Fake Charities and Disaster Fraud

After every natural disaster, fake charities emerge to collect donations that never reach victims. In 2026, the IRS has flagged scam organizations claiming to support victims of Hurricane Rafael (2025), western wildfires, and international crises. Some fake charities also operate year-round, targeting religious communities and elderly taxpayers.

How the scam works:

• Fake charity collects donations via phone, email, or GoFundMe-style platforms
• Donor claims charitable deduction on Schedule A
• The IRS may deny the deduction because the organization is not a qualified 501(c)(3)
• The donor loses both the money donated and the tax deduction

Protection: Before donating, verify the organization's tax-exempt status using the IRS Tax Exempt Organization Search tool. Be cautious of organizations with names similar to well-known charities. Never donate via gift card, wire transfer, or cryptocurrency to an unfamiliar organization. Cash donations over $250 require a written acknowledgment from the charity to be deductible.

6. Social Media Tax Advice and "Free Money" Schemes

TikTok, Instagram, YouTube, and X (formerly Twitter) are flooded with tax advice that ranges from incomplete to outright fraudulent. The 2026 list highlights viral videos claiming you can:

• Write off your entire rent as a home office deduction
• Claim your dog as a dependent
• Deduct your entire car payment (not just the Section 226 interest, but the full payment)
• Get a refund by filing Form 4852 with fabricated W-2 income
• Claim fuel tax credits (Form 4136) for personal vehicles

The fuel tax credit scam is particularly dangerous. Form 4136 is a legitimate credit for off-highway business use of fuel (farming, construction, commercial fishing). It is not for commuting or personal driving. The IRS has identified thousands of fraudulent Form 4136 claims generated by social media advice, and is imposing the 75% fraud penalty on filers.

Protection: Do not take tax advice from social media without verifying it with a qualified professional. If something sounds too good to be true, it is. Legitimate tax deductions require substantiation, and legitimate credits require qualifying activities.

7. Spearphishing Attacks on Tax Professionals

This one affects you indirectly. Scammers target CPAs, enrolled agents, and tax attorneys with sophisticated spearphishing attacks designed to steal client data, including Social Security numbers, financial information, and prior-year returns. A successful breach at your preparer's office can result in fraudulent returns filed in your name.

What tax professionals are seeing in 2026:

• Emails impersonating IRS e-Services requesting credential verification
• Fake Intuit/Drake/Lacerte login pages designed to harvest practitioner portal credentials
• Ransomware attacks encrypting client files with demands for cryptocurrency payment
• Deepfake phone calls from "clients" requesting emergency return information

Protection (for taxpayers): Ask your tax preparer about their data security practices. A reputable firm should have encrypted storage, two-factor authentication, written information security plans (required by the FTC Safeguards Rule), and cyber liability insurance. If your preparer cannot articulate basic security practices, consider whether your data is safe.

8. Offer in Compromise Mills

An Offer in Compromise (OIC) is a legitimate IRS program allowing taxpayers to settle tax debt for less than the full amount owed. The acceptance rate is approximately 30-40%. OIC mills advertise on TV and radio with claims like "settle your tax debt for pennies on the dollar" and charge thousands in upfront fees to submit applications that have no realistic chance of acceptance.

Reality check:

• The IRS accepted approximately 15,000 OICs in 2024 out of roughly 45,000 filed
• The average settlement was 20-25% of the total debt
• The IRS formula is based on your ability to pay, not a negotiation
• If you have equity in assets or stable income, you will likely not qualify
• Many mills file the application, collect the fee, and provide no further assistance when the OIC is rejected

Protection: Before paying anyone to file an OIC, use the IRS Offer in Compromise Pre-Qualifier tool. It is free and gives you a realistic estimate. If your situation warrants an OIC, work with a CPA, enrolled agent, or tax attorney — not a company you found from a TV commercial.

9. Inflated Refund Claims and Refund Fraud

This category covers preparers who inflate deductions, fabricate expenses, or claim credits without basis to generate larger refunds (and larger fees). Common inflated claims in 2026 include:

• Earned Income Tax Credit (EITC) claims with fabricated self-employment income to meet qualification thresholds
• Child Tax Credit claims for children who do not live with the taxpayer
• Education credits (AOTC/LLC) for tuition payments that never occurred
• Schedule C losses from nonexistent businesses to offset W-2 income

The IRS has significantly increased EITC audits in 2026, with a particular focus on Schedule C filers claiming self-employment income just above the EITC qualification threshold.

Protection: Review your return before signing. If your refund is significantly larger than expected and you cannot explain why, ask questions. If a preparer is evasive or pressures you to file without review, walk away. You are legally responsible for what is on your return, even if a preparer filled it out.

10. Abusive Tax Shelters and Syndicated Conservation Easements

Abusive tax shelters promise dollar-for-dollar deductions or credits that exceed the economic substance of the transaction. The IRS has been particularly aggressive against syndicated conservation easements, where investors purchase an interest in land, donate a conservation easement, and claim a charitable deduction that is 4-10 times their investment.

In 2026, the IRS is also targeting:

• Micro-captive insurance arrangements (Listed Transaction since November 2016, Notice 2016-66) that use small captive insurance companies to generate inflated deductions
• Monetized installment sales claiming to defer gain recognition through intermediary structures
• Maltese pension arrangements used by US taxpayers to shield income

Protection: If someone promises you a tax deduction of 2x, 3x, or 10x your investment, it is almost certainly an abusive shelter. Legitimate tax planning produces reasonable, documentable benefits. Ask your CPA before investing in any arrangement primarily marketed for its tax benefits.

11. Misleading Tax Debt Resolution Companies

Distinct from OIC mills, these companies broadly claim they can "fix" any tax problem — unfiled returns, liens, levies, penalties — for a flat fee. They often charge $5,000-$15,000 upfront and then do little or nothing.

Common tactics:

• Promising to "remove" penalties that the IRS actually imposed correctly
• Claiming to "negotiate" with the IRS when the IRS process is formula-based
• Charging for services you can perform yourself (installment agreement applications are free on IRS.gov)
• Disappearing after collecting the fee, leaving you with the same tax debt plus their fee

Protection: If you owe back taxes, you have legitimate options: installment agreements, currently not collectible status, offers in compromise, and penalty abatement. A CPA or enrolled agent can evaluate which option fits your situation without charging $10,000 to file a form. See our IRS audit representation services for legitimate help.

12. Identity Theft and W-2 Scams

Tax-related identity theft occurs when someone files a fraudulent return using your Social Security number to claim a refund. The IRS flagged approximately 1.1 million identity theft returns in 2025. Common attack vectors in 2026 include:

• W-2 scams: Emails impersonating company executives requesting HR departments to send all employee W-2 data. Successful attacks compromise thousands of SSNs at once.
• Data broker exploitation: Stolen PII from data breaches combined with publicly available information to file returns before the real taxpayer
• State return fraud: Filing fraudulent state returns (including NJ-1040) where verification is less stringent than federal
• Child identity theft: Using children's SSNs (which typically have no filing history) to file fraudulent returns

Protection:

• File your federal and NJ returns as early as possible — first filer wins
• Request an IP PIN from the IRS (Identity Protection Personal Identification Number) at irs.gov/ippin
• Monitor your IRS account at irs.gov/account for unexpected filings
• Freeze your credit with all three bureaus (Equifax, Experian, TransUnion)
• If you are a victim: File IRS Form 14039 (Identity Theft Affidavit) and NJ Form ID-50

NJ-Specific Scam Warnings

NJ Division of Taxation Phishing

The NJ Division of Taxation has issued multiple alerts about emails and text messages impersonating the Division. These typically claim you owe additional NJ tax, threaten to suspend your driver's license, or promise an ANCHOR program rebate if you click a link.

The NJ Division of Taxation communicates via US Mail. Any email or text claiming to be from the NJ Division of Taxation is fraudulent. Report it to the Division at taxation.fraud@treas.nj.gov.

NJ Identity Theft Procedures

If you are a victim of NJ tax identity theft:

1. File a police report with your local NJ police department
2. Submit NJ Form ID-50 to the NJ Division of Taxation
3. File IRS Form 14039 for federal identity theft protection
4. Contact the NJ Division of Taxation Identity Theft Unit at (609) 292-6500
5. Place a fraud alert or credit freeze with all three credit bureaus
6. File early in subsequent years — the NJ system does not have an equivalent of the federal IP PIN

NJ ANCHOR Program Scams

The ANCHOR program (Affordable New Jersey Communities for Homeowners and Renters) provides property tax relief for NJ residents. Scammers exploit ANCHOR by:

• Sending fake ANCHOR approval emails with links to "claim your benefit"
• Calling homeowners claiming their ANCHOR application was "incomplete" and requesting SSN verification
• Creating fake ANCHOR application websites that harvest personal information

Protection: The ANCHOR application is filed through the NJ Division of Taxation website (nj.gov/treasury/taxation/anchor) or by phone. The Division will never email you to request personal information. Your ANCHOR benefit is paid by check or direct deposit to the account you specified on the application — it is never distributed through a link in an email.

How to Report a Tax Scam

Frequently Asked Questions