Tax season can be stressful, making it a prime target for scammers. To help protect yourself, it’s important to understand common types of tax scams and learn how to recognize red flags.
Common tax-related scams
Fraudsters use various schemes to steal money and identities, most of which can happen through phishing, smishing or vishing attempts.
Unfortunately, with the rise of AI, scammers can execute their scams faster and with more sophistication. If you're worried about an email, text or phone call, hang up or don't respond. Then, verify the individual through trusted phone numbers or websites.
1. IRS impersonation
In these cases, scam artists impersonate IRS officials and push for immediate payment. They may even request payment through unusual methods, like a mobile payment app. These scammers often use high-pressure tactics, like claiming that the victim's account has been compromised or that they owe back taxes, or threaten arrest or license revocation.
Fortunately, the IRS lists the ways in which they will and will not contact you to help verify legitimate IRS communications. Keep in mind, fake websites pop up regularly, so always check that you’re on the official IRS website.
2. Tax preparer fraud
Fraudulent tax preparers may promise inflated refunds or claim improper credits, deductions or exemptions to illegally boost the refund amount. They may also not sign the return or require that refunds be put in their bank account. Other red flags include requesting payment via cash, gift cards, wire transfers, crypto or other unusual methods, often without giving you a receipt.
If you're worried about an email, text or phone call, hang up or don't respond. Then, verify the individual through trusted phone numbers or websites.
4. Fake charities
Fraudulent nonprofits — many of which pop up following natural disasters — deceive taxpayers by taking advantage of your generous nature to steal your money or your identity. Remember, only donations made to IRS-recognized tax-exempt organizations qualify as charitable contributions for tax purposes.
5. Identity theft
Scammers also use stolen personal information during tax season to file fraudulent tax returns and claim others' refunds. Unfortunately, this is often not identified until a legitimately filed claim is rejected by the IRS as “previously filed.” Also beware of phishing attempts requesting that you “update your IRS account.” Not only could your personal information be compromised, but clicking on certain links could install malware on your device.
6. Inaccurate advice on social media
The spread of incorrect tax information on social media is a rising concern, which can mislead taxpayers and potentially lead to identity theft or other serious tax problems. Social media posts could contain inaccurate advice, sometimes even encouraging the misuse of common tax documents. Ultimately, it’s important to only seek advice from trusted sources like the IRS or qualified tax professionals.
7. Scams targeting independent workers and 1099 filers
Scammers can use any of the tactics above to target independent workers and 1099 filers with fake W-2 forms, 1099-MISC forms or other tax-related documents. As with any potential scam, if you're suspicious, cut off contact with the individual, don't respond to their messages and verify identities with legitimate websites and phone numbers.
Tax scam red flags
Despite the variety of tax scams, most share common red flags. Knowing these signs can help you stay protected:
Unsolicited emails, phone calls and other communications claiming to be from the IRS
Requests for payment via gift cards, wire transfers or other unusual methods
Threats or urgent demands for immediate action
Protecting yourself against tax scams
Filing taxes can be stressful enough without having to worry about scams. Since tax fraud is becoming more common, the following actions can help you protect yourself.
Verify communications
If you receive phone calls, emails, texts or other communications asking for sensitive information, contact the IRS directly using official channels to verify. And always be skeptical of unsolicited emails, calls and texts requesting personal information.
Safeguarding personal information
A scammer doesn’t have to contact you to steal your information. Protect your accounts with strong, unique passwords, multi-factor authentication and regularly monitor financial statements and credit reports for suspicious activity. It’s also important to be vigilant by checking links and verifying that a website is legitimate before entering any personal information.
Stay informed
Keeping up to date on the latest tax scam alerts from the IRS website can help you recognize new cyber scam tactics and schemes.
What to do if you encounter a tax scam
Even the most vigilant taxpayers can fall victim to a scam. If your personal or financial information is stolen or you think someone isn't following tax law, here's how to act quickly.
Report the scam
Should you experience any of the scams above, report it to the IRS directly on their website.
Take immediate action
If your personal or financial information has been compromised, place a fraud alert on your credit report. Consider freezing your credit and file a complaint with the Federal Trade Commission (FTC).
Strengthen your security ahead of tax season
While there's no guaranteed way to stop tax scams, being prepared and informed can go a long way in protecting yourself. Remember, the IRS will never contact you by phone, email or social media to request sensitive information or payment. As tax season rolls around, stay alert, and don't hesitate to report any suspicious activity to the IRS or the FTC.
