The closer we get to tax season, the more likely you are to see tax scams. With taxes being top of mind for most Americans, scammers are preparing tax-related phishing emails and phone calls, as well as posing as tax preparers and coming up with other tax fraud schemes. These scams often result in identity theft, financial losses, and could cause you legal issues.
What is a Tax Scam?A tax scam is an attempt by a scammer to get money or personal information from individuals or businesses during tax season. While there are many different ways they go about this, they all have the same goal: to trick taxpayers out of their their money or personal information. Some common tax scams you should be aware of include: |
Phishing Emails and Phone Calls
These types of tax scams usually start with an email or phone call from someone claiming to be from the IRS, a tax agency, or law enforcement. They have various hooks to get you to respond, such as trying to get you to call them back to avoid tax penalties or getting arrest, or getting you to visit a fake website to get more information from them. Once you respond to one of these hooks, they’ll ask for personal and financial information, such as your Social Security number or bank account information. This may be on a phone call with a representative or on a fake website designed to steal your information.
Fake Tax Preparers
These scams involve individuals or companies posing as legitimate tax preparers, often offering lower fees or larger refunds to lure in unsuspecting taxpayers. They may not have the proper credentials or knowledge to accurately prepare tax returns, but are posing as a tax preparer to make a quick buck — which can lead to errors, audits, or legal trouble — or to get access to your personal and financial information. Fake tax preparers often promise taxpayers large refunds to get them to use their services, and may accomplish this by inflating deductions or credits, claiming false expenses, or failing to report income. They may also charge huge fees for their services or may have fraudulent tax returns diverted to themselves.
Tax Fraud Schemes
These illegal schemes involve many different ways to evade taxes, underreport income, or claim false deductions or credits on tax returns. These schemes are usually complex and involve multiple individuals or organizations working together to commit tax fraud. It may involve hiding money or assets in offshore accounts to avoid paying taxes, claiming false charitable deductions, failing to pay employment taxes, such as Social Security and Medicare taxes, or intentionally misclassifying workers as independent contractors to avoid paying employment taxes. It may also be as simple as stealing someone’s personal information or Social Security number to file a false tax return and claim a refund.
What to Watch For to Avoid a Tax Scam
To avoid falling victim to a tax scam, here are some things to watch for:
Unsolicited Emails or Phone Calls: The IRS will never contact you by email or phone unless you have initiated contact first. If you receive an unsolicited email or phone call claiming to be from the IRS, a tax agency, or law enforcement, it’s likely a tax scam.
Requests for Personal Information: The IRS will never ask for your Social Security number, bank account information, or other personal information via email or phone. If you receive a request for this information, it’s likely a scam.
Unrealistic Promises: If a tax preparer or scheme promises you a large tax refund or a way to avoid paying taxes altogether, it’s likely a scam. Legitimate tax preparers will not make promises they cannot keep.
Pressure to Act Quickly: Scammers often use high-pressure tactics to get you to act quickly, such as threatening legal action or promising a limited-time offer. Legitimate tax agencies and preparers will not pressure you to act quickly.
What You Can Do to Avoid a Tax Scam
Once you know what to watch for, these are tips on how to avoid getting scammed:
Protect Your Personal Information
Get an Identity Protection PIN from the IRS. It is a six-digit number that prevents someone else from filing a tax return using your Social Security number or Individual Taxpayer Identification Number. The IP PIN is known only to you and the IRS. It helps us verify your identity when you file your electronic or paper tax return. Even though you may not have a filing requirement, an IP PIN still protects your account. Never give out your Social Security number, bank account information, or other personal information unless you are absolutely certain it is a legitimate request.
Be Wary of Emails and Phone Calls
If you receive an unsolicited email or phone call claiming to be from the IRS or another tax agency, do not give out any personal information. Instead, hang up or delete the email and contact the IRS directly to verify the request.
File Your Taxes Early
Filing your taxes early can help prevent scammers from filing a fake return in your name. The earlier you can file, the less time cybercriminals have to steal your refund.
Use a Reputable Tax Preparer
Before using a tax preparer, do your research to ensure they are certified or licensed. The IRS provides a directory of tax professionals on their website. If a tax preparer or scheme promises you a large refund or a way to avoid paying taxes, it’s likely a scam. Legitimate tax preparers will not make unrealistic promises.
Monitor Your Credit Report
Check your credit credit card and bank statements and monitor your credit report regularly to make sure there are no unauthorized accounts or activity.
Tax scams are a serious threat during tax season, but by staying vigilant and following these tips, you can protect yourself from becoming a scam victim.
Reporting a Tax Scam
Illegal schemes to avoid paying taxes can result in imprisonment and fines, as well as the repayment of taxes owed with penalties and interest. If you are approached about any potential type of tax scam, please report them appropriately here.