Common Tax Scams and How to Avoid Them
It’s tax time again, which means that scammers are out in full force, hoping to take advantage of taxpayers through a variety of means – using phone, email, text and in-person scams to engage victims.
While scammers often cast a wide net in their efforts, some focus on the more vulnerable, such as the elderly or non-English speakers.
Many people think they can’t be tricked. But each year, scammers are getting smarter and more sophisticated in their efforts. Even people who consider themselves technologically savvy and assume they can’t be fooled can fall victim to the ploys.
The best way to protect yourself from these scams is by understanding the newest and most common tactics, as well as how and why they work.
Red Flags in Communications from the IRS
Since many scammers target individuals by posing as the Internal Revenue Service, a great starting point is understanding how the agency does and doesn’t communicate.
- In most cases, the agency’s first contact with taxpayers is through the U.S. mail.
- IRS employees may also call or visit taxpayers, particularly if the individual has an overdue bill or delinquent tax return.
- But in most cases, you’ll be informed of such a visit in advance through a notice that is mailed to you. And when an IRS representative visits, they will carry official credentials, which you have a right to inspect: a pocket commission and HSPD-12 card.
What does the IRS not do? It doesn’t normally communicate with taxpayers via email. And the agency never uses social media or text messages for these purposes. Keep these habits in mind when you receive communications during tax season.
Be on the Lookout for These Scams
Here are some of the common and evolving schemes that tax scammers use to defraud taxpayers, and tips for protecting yourself from them:
- Requests from fake charities
You may be asked to make a tax-free donation, typically through a phone call, to a particular charity. However, the requests may come from fake organizations set up to exploit people’s generosity, targeting anyone who might want to support a cause that’s dear to them.
Tip: To protect yourself, never feel pressured to donate to a cause or organization on the spot. Instead, take time to research the charity to ensure its legitimacy. If you want to donate to a specific cause, choose one that you’re familiar with and that aligns with your values.
- Threatening phone scams
Tricksters impersonating the IRS may call to demand cash payments or past-due taxes, threatening criminal action, police arrest or deportation. These scammers may also target immigrant and senior populations in particular. But the IRS will never threaten these things, nor will they demand a specific form of payment over the phone.
Tip: Protect yourself by never sharing personal or financial information and by reporting events like this to the police. And if you do owe taxes, payments should be made to the U.S. Treasury – visit https://www.irs.gov/payments for details.
- Phishing emails
You may receive emails claiming to be from the IRS and referencing a bill or refund you weren’t expecting.
Tip: The IRS doesn’t use email to discuss tax debts or refunds with taxpayers, so if you receive this type of communication, avoid it.
- Social media scams
Scammers may comb your social media profiles, then try to impersonate a family member or friend and solicit money or information – personal or financial – from you.
Tip: Never trust any such request that comes to you by way of social media, even if from a family member or friend. Speak with the person directly instead to confirm their request.
- False tax preparers posing as professionals
These scammers may pretend to be legitimate but are trying to steal your money. In many cases they will request high fees, targeting those who don’t speak English fluently or don’t fully understand how the U.S. tax system works.
Tip: Protect yourself by using the IRS’ Federal Tax Return Directory to find a legitimate professional in your area.
- False tax returns
If a scammer gets your Social Security number, they can attempt to file a tax return – and receive a refund – in your name.
Tip: To prevent this, take every precaution to safeguard your Social Security number. Also try to file your taxes early, thwarting scammers who will focus on this tactic early during tax season, before their victims have had a chance to file.
- False promotions
Some scammers will post flyers, advertisements and even false storefronts offering to file your return for you and promising to get you a bigger tax refund than you’re due. But their real aim may be to cheat you out of money or to get access to your personal information or tax refund.
Tip: Anyone asking you to sign a blank tax return or who estimates numbers around your taxes should raise suspicion and be avoided.
- Social Security refund scams
Similar to false preparer fraud, these scammers may promise to help you get a larger Social Security refund, then inflate numbers and steal your refund.
Tip: Always be wary of a tax preparer who claims they can get you more than you’re expecting. In cases like this, it’s best to get a second opinion.
Being wise to these common ploys is the first line of defense in helping to protect you from tax scams this season. The IRS also offers a host of educational resources on the latest and evolving tax scams, as well as how to report scams. So, if you do receive a communication purporting to be from the IRS that raises questions, it’s always best to refer to IRS.gov to help verify whether it’s legitimate.
You’ll also want to keep your online security strong: ensure your passwords are in keeping with the latest standards and keep a close eye on your accounts.
Also know that Key is here to help: We can assist you with setting up automatic account alerts so you can monitor your accounts and transactions closely. We also offer a range of services, programs and consultations to make it easier to manage your finances and personal information during tax season and all year long.