Avoiding Tax Scams

In this topic, you'll learn:

• How to identify common tax scams.
• Steps you can take to avoid tax scams.
• Why protecting your personal information is so important.

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Tax season is a time when fraudsters come out of the woodwork to try and take advantage of unsuspecting taxpayers. These tax scams can have severe consequences for victims, including identity theft, financial loss, and legal trouble. Here's how to recognize and avoid common tax scams.

Common Tax Scams

Tax scams can come in many forms, from phone calls and emails to fake websites and social media posts. Examples of tax scams include:

Fake Charities

Scammers create fake charities or use the names of legitimate charities to solicit donations. They may use high-pressure tactics to get people to donate quickly without doing their due diligence. The money collected is often used for personal gain rather than charitable purposes.

Fake Tax Preparers

Fake tax preparers may offer to prepare your taxes for a lower fee than legitimate tax preparers but often lack the knowledge or credentials to do so. In some cases, they may even steal your personal information and use it for fraud.

Inflated Refund Claims

Some tax preparers may promise a bigger refund than you're entitled to to attract business. This scheme can involve falsifying deductions or credits, which is illegal and can result in serious consequences.

Malware Email Attachments

You may receive an email that claims to be from the IRS with a file attachment. When you click the attached file, malware is installed on your computer.

"Pennies on the Dollar" Tax Settlements

While it's true that the IRS does offer an Offer in Compromise program that may reduce your tax bill, fraudulent companies often make false promises and charge exorbitant fees.

Phishing Scams

Phishing scams are one of the most common types of tax scams and involve emails or other communications that appear to come from the IRS. The emails typically ask the recipient to click on a link or provide personal or financial information. The links can lead to a fake website that looks like the official IRS website but is designed to steal users' personal information.

Phone Scams

Phone scams involve a caller posing as an IRS representative and demanding immediate payment of a tax debt. The caller may threaten the victim with legal action, arrest, or even deportation if they don't pay immediately. The caller may also ask for personal or financial information that can be used for identity theft. In some cases, scammers may even use fake caller ID information to make it appear that the call is coming from the IRS or another legitimate source.

Refund Recalculation Scams

These scams involve texts or emails from the IRS that claim that they've recalculated your tax refund and have found that you are entitled to a larger refund. Clicking the links will take you to a website that asks for sensitive personal information that can be used for identity theft.

Avoiding Tax Scams

The best way to protect yourself is to be aware of the most common tax scams and take steps to avoid them. And remember, when the IRS needs to contact you, mail delivered via the US Postal Service is their preferred method – not email or text messages.

• Be suspicious of unsolicited emails, phone calls, or social media messages that claim to be from the IRS or other government agencies. 

• If you receive a phone call, email, or social media message that appears to be from the IRS, verify the source before providing any information.

• Be careful when giving personal or financial information over the phone or online. The IRS will never ask for your Social Security number or other sensitive information over the phone or by email.

• Use caution when clicking on links in emails or social media messages. Make sure the URL is a legitimate IRS or government website.

• Never provide a credit card number to anyone claiming to be an IRS employee. Further, the IRS will never ask for gift cards to pay your tax bill.

• Research and choose a reputable tax preparer with the necessary credentials and experience when using tax preparation services. 

• Research any charity before donating. Ensure it is a legitimate organization and that your donation will be used for charitable purposes.

• File your tax return early to reduce the risk of identity theft. The earlier you file, the less time scammers have to file a fraudulent return in your name.

• Use strong, unique passwords and two-factor authentication to protect your online accounts. This strategy can help prevent identity theft and protect your sensitive information.

• Keep your computer and antivirus software up to date to prevent malware and other cyberattacks that can lead to identity theft and fraud.

If you suspect a tax scam has targeted you, immediately report it to the IRS. If you suspect identity theft, please review our identity theft content for more information.

The Takeaway

Tax scams are a threat, but there are steps you can take to protect yourself from becoming a victim. Remember that the IRS will never demand immediate payment, threaten legal action, or request personal or financial information by phone or email. 

If you receive a suspicious email or phone call, immediately report it to the IRS and your local authorities. By being vigilant and cautious, you can avoid tax scams and protect yourself from financial loss and identity theft.