The tax season can be a stressful period for businesses. This period is marked with pressures to file for returns by a deadline and it inadvertently provides good opportunities for scammers to strike. Scammers pounce on opportunities to steal your sensitive data, identity theft or trick you out of money by employing elaborate ruses using tax scams.
Tax scams can involve criminals impersonating IRS agents, government agencies, customer support employees and more. They can reach out to you in person over the phone, online or via the mail in an effort to trick you into sending them money for taxes, pay penalties or fees you don’t actually owe.
They often prey on the least suspecting using tactics cloaked in the guise of the official Internal Revenue Service business. The scams can be simple or extremely elaborate. What they count on are unsuspecting individuals they can easily dupe with threats and a sense of urgency to avert any penalties or fines.
Below are some of the tax scams you need to watch out for. Some have been there for some time while others are variations or entirely new scams.
This is a widely used tax scam that comes in various forms. It is a scam typically carried out with the help of unsolicited email or a fake website posing as a legitimate site to lure in potential victims.
There are basically two objectives here. One is to prompt you to provide valuable personal and financial information. Armed with this information scammers can commit identity theft or financial theft. The second is to help install some form of malicious malware.
The IRS does not send unsolicited e-mails to taxpayers about their tax accounts. If you receive such emails report it to email@example.com. By reporting such activities, you not only stop the scammers but also prevent others from becoming victims as well.
Identity theft is a crime in which crooks obtain the personal or financial information of another person for the sole purpose of assuming that person’s name or identity to make transactions or purchases.
It occurs through gaining access to your sensitive personal and financial information. This could be through rummaging through your trash, social engineering by using shrewd tactics such as going through your social media posts to glean information about you or use corporate data breaches.
Once they have the information they are looking for, identity thieves can access your financials or swindle you, unsuspecting customers. If you are a victim of identity theft contact the Federal Trade Commission immediately.
Easy Money Lure
Often scammers will try to entice you with a get rich quick scheme. These will often come by way of a loophole that you can employ with their help to get significant refunds. These might be asking you to falsify income, claiming credits or advertise some form of offshore tax avoidance scheme. If you become a victim of offshore money stashes, the money is likely to stay with the scammers and the IRS may prosecute you
Another sinister ploy is for scammers to approach you claiming you either have a refund or are eligible for a lottery or sweepstakes. The rule of thumb here is always “If it is too good to be true then it probably is.”
Your Account or Tax Return is Locked or Restricted
This is a phishing scam that comes to you by e-mail. The email would look somewhat official and claims to be that from the IRS and can also include the IRS logo.
It will tell you your tax return has been restricted claiming your account has been hacked. In this scenario, the con artists will prompt you to click on a link and submit your personal information under the ruse of getting your sensitive personal information.
Update Your Tax Filling Information
This is a variant of the phishing scam. In this case, the email claims the recipient needs to update their tax filing information or their tax return. Here you will be directed to click on to a link where your personally identifiable information can be accessed and submitted to cybercriminals. In some cases, the link can be replaced by an HTML attachment.
Offers of a Tax Refund
Unsuspecting victims might be lured into yet another phishing scam where the prospect of a refund is dangled. For you to get the refund you need to provide proof of identity. This could be a scanned copy of your ID, a utility bill or a credit card statement. In some cases, the refund comes with a fee to get a refund.
The Surprise Refund Bait-and-switch
This is another twist on an old scam. After the scammers have secured your sensitive personal information, such as social security numbers and tax forms, they can easily file a fraudulent return on your behalf.
Once the fund is in your bank account, the scammers, impersonating someone from the IRS or a collection agent, will contact you to demand the return of the ill-gotten money either by depositing into an account or sending it to an address.
IRS Impersonation Phone Call
One of the oldest schemes used every year is scammers calling and claiming to represent the IRS to taxpayers and demand an immediate tax payment.
The calls come from a phone number that appears to belong to the IRS on your caller ID. They might threaten or intimidate you into making a rash decision. Do not be lured into making hasty payments or giving out sensitive information.
Make sure to record the phone number and verify it is actually coming from the IRS. All tax-related disputes have a course of action and detailed paperwork of notices. You can report suspected IRS scams to the Treasury Inspector General for Tax Administration (TIGTA).
Ask you to Put Money on a Prepaid Debit Card or Wire Money to Them
Once scammers have initiated contact and have reeled you in, they will ask for some payment. Those that are really audacious will ask you to transfer money by gift card or wire transfer. Scammers have also extended this scheme to email and social media channels.
The IRS does not request such payments.
Threaten to Cancel or Suspend Your Social Security Number
Criminals can make contact threatening to suspend or cancel your Social Security Number (SSN) until your overdue taxes are paid. The scam may appear real as the callers have some of your personal information.
This could be the last four digits of your SSN, your bank statements or any information that might appear that it’s the government that is contacting you. You can report such incidents to the Social Security Administration’s website.
Fake Texts or Social media Messages
Scammers are ever more sophisticated and have elaborate tricks in their arsenal. They can come up with authentic-looking messages sent from credible-looking addresses to trick victims into sharing sensitive information or installing malware.
Before offering up any sensitive information make sure you can verify the authenticity of the request.
Stealing Social Security Numbers and then Filling False Returns
This scheme occurs when fraudsters use your information to get a refund from the IRS before you even file your taxes. What they do is steal your social security number and personal information and file a tax return. They typically claim a low income with high deductions by filing electronically.
Scammed by Your Tax Preparer
You might be targeted by your own tax preparer. In some cases, those you trust the most are the actual scammers. Your preparer might put together returns with false information in order to boost a refund. In other cases, they might even steal your personal information as well.
If someone comes out of the blue to do your taxes for free or cheap should raise red flags.
If you’re using a tax professional or online service to file your tax return, do some research before you narrow down your selection. Look up customer reviews or ask for references to make sure the person or service you’re using is legitimate and will keep your data secure.
Send Out a Fraudulent Form to Steal Your Information
Some scammers are so sophisticated they send you a fake form looking very similar to an official IRS document. In it, they ask you to fill in answers to help them steal your identity. Some are so audacious they ask for passwords and even security PIN numbers.
Please Take a Survey
Another variation of stealing your identity. In this case, an email purporting to be from an official government agency asks you to fill out a survey. This will often redirect you to an online survey where questions will require you to fill in sensitive personal and financial information under the pretense to confirm your identity.
Posing as a Taxpayer Advocacy Panel
People claiming to be from the Taxpayer Advocacy Panel (TAP) approach you about a tax refund or tax-related issue. Usually, this is a variant of a phishing scam where they try to trick you into providing personal and financial information. The Taxpayer Advocacy Panel never requests and does not have access to any taxpayer’s personal and financial information.
Asking for Your Credit Card or Debit Card Number Over the Phone
Some scammers will cut across the ruse and directly ask for your credit card or debit card number over the phone. The IRS doesn’t call to ask for your credit card number.
Coming to Your Home or Place of Business Posing as an IRS Agent
Some really bold scammers actually impersonate an IRS agent and literally come in person. In the off chance, it actually is an IRS agent request to see their credentials and verify the information by calling the IRS. Also know that actual agents will not demand you pay right then and there. Agents just don’t just drop by. You will get a notice of their visit beforehand.
Threatening to Revoke Driver’s License or Have you Deported
The key to any swindle is to distract the victim enough so they have to make quick decisions without thinking it through. Very often this is done by making outlandish threats such as threatening to arrest you, get you deported, or have your driver’s license revoked. The IRS does not have these powers. As a taxpayer, you have the opportunity to question or appeal what the IRS says you owe.
In recent years scammers have been targeting vulnerabilities in online security by designing malicious software that exposes unwitting customers to data breaches or prevents you from accessing your data. The malware can take over the victim’s computer hard drive, giving someone remote access to the computer, or it could look for passwords and other information and send them to the scammer.
Victims should not pay a ransom as it further encourages the criminals and, in most cases, scammers will not provide the decryption key even after a ransom is paid.
Your Dependent Has Been Claimed by Someone Else
You might be in for a rude awakening when you file your tax return and find out that it has been rejected. This might happen when someone else has already claimed them on another return. Because the IRS processes the first return it receives, if another person claims your dependent first, the IRS will automatically reject your return. In this case, your only recourse is to print out the mail return and claim your dependent and document your claim with the IRS.
Falsifying Income to Claim Credits
Fraudsters will approach and convince you to create income to erroneously qualify for tax credits. This can lead to face large bills to pay back taxes, interest and penalties as well as possible incarceration.
Scammers love charities. Posing as charitable organizations who are soliciting donations, they swindle tens of millions of dollars every year. Be wary of charities with names similar to familiar or well-known organizations.
Stealing Your Tax Refund
Through phishing, identity theft or some other ruse, scammers will use your personal information to file a tax return in your name. You will only find out until you try to file yourself and have your filling rejected by the IRS. The purpose here is not to pay your back taxes but to pocket your refund.
Not only will you face the daunting task of proving you didn’t file but the IRS will delay your refund. Additionally, they can also open credit accounts, file fraudulent health insurance claims and other financial crimes with your information.
Tech Support Scams
This is often a nifty way of stealing valuable information under the pretense of solving a technical glitch. Scammers will pose as a company you do business with or maybe your internet service provider. They tell you there are viruses or other malware on your computer to sell you a service. The objective here is to steal your credit card number or gain access to your computer.
Remember, don’t volunteer any information. Instead, tell them to give you their contact info so you can call them later to work with them. Call customer service and verify if they actually work there. Sometimes these come by way of pop-up warnings that might appear on your computer screen.
If you suspect there may be a problem with your computer, update your computer’s security software and run a scan. If you need help in fixing your computer get someone you know and trust to help you. Remember software companies offer support online or by phone, check with them first.
Things to Remember
As the adage goes, prevention is better than cure. There is no substitute for knowing what you as a taxpayer have in terms of rights and responsibilities. Some scams can be elaborate and really convincing, and people behind them can be difficult to catch. We all need to always keep our guard up.
Your first line of defense is to stay informed about the latest scamming strategies and have on hand contacts to the IRS helpline. Know what the IRS can and can’t do. Whenever you are in doubt, assume it’s a scam. The IRS has a dedicated Tax Scams webpage where the agency publishes warnings and updates about the current scams that are being used.
A common telltale to any scam is the victims are often confronted with a demand that comes with a sense of urgency. Do not be quick to divulge any sensitive information before confirming those seeking the information are who they truly are. Identity theft is very common, educate yourself on how people are dealing with scams and becoming victims. If you suspect you are a victim of identity theft you can also contact the Federal Trade Commission to file a complaint.
Know What the IRS Can and Can’t Do
Always remember the IRS does not initiate taxpayer communications through email, text messages or social media requesting personal or financial information. An easy giveaway is when the email addresses you as sir, madam or taxpayer. Never click on any links or open attachments claiming to be from the IRS. Never ever respond to unsolicited emails requesting sensitive personal information, scan copies of IDs, bank statements, credit card information or utility bills.
Learn to recognize and avoid phishing emails, threatening calls and texts from thieves posing as legitimate organizations such as your bank, credit card companies and even the IRS. More importantly, never open a link or attachment from an unknown or suspicious source. If you’re not sure about the authenticity of an email, don’t click on hyperlinks.
Use strong passwords to protect online accounts and use a unique password for each account. Use a combination of letters, numbers and symbols. If possible, use two- or multi-factor authentication when possible. Make sure you regularly conduct deep scans of your system to keep your data safe.
There is no foolproof way to ensure you will not fall prey to a scam. But you can prevent unnecessary heartache and pain by filing early. Federal tax season typically starts at the end of January, and most people receive W-2 forms and other required tax documents around that time. When you have everything you need to file, don’t waste any time filing your taxes. Filing early will prevent scammers from filing a return in your name as it will be automatically denied as a duplicate.
Always protect your personal information and that of any dependents. Don’t routinely carry Social Security cards, and make sure your tax records are secure.
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Thanks for this list. It is nice to learn the different tax scams so that you know what to avoid and how to prevent it.