Tax Scams? Here’s How to Avoid Falling Victim to Them
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No one likes filing their income taxes. But what makes the experience even less pleasant? Falling victim to an IRS tax scam.
Unfortunately, scammers are always eager to trick taxpayers, whether it’s posing as IRS agents to steal victims’ Social Security numbers, threatening victims with jail time if they don’t send them immediate payments, or filing false income tax returns to nab the refunds of unsuspecting taxpayers.
The good news? You can take steps to prevent falling victim to tax scams. The key is to avoid giving out your personal or financial information to strangers and to remember that the IRS, as intimidating as it might be, will never threaten to arrest you for filing errors.
Here is a look at some of the more common IRS tax scams and how to avoid them.
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Scam 1: Tax-related identity theft
Are you expecting a big tax refund this year? Be on the lookout: Scammers might want to steal it.
According to the IRS, tax-related identity theft happens when scammers steal your personal information, usually your Social Security number, birth date, and address. These scammers then file an income-tax return in your name using this information.
Why do this? Scammers want to impersonate you to steal any income-tax return coming to you.
The challenge is identifying whether you are a victim of this crime, something you might not know until you file your tax return. You might file your return only to have the IRS reject it, saying that someone has already filed a tax return associated with your Social Security number.
The IRS might also send you an email stating that an online account has been created in your name at IRS.gov. If you never signed up for such an account, this might be a clue that someone has stolen your information and is using it to snatch your income-tax refund.
If you have been the victim of tax-related identity theft, fill out IRS Form 14039, Identity Theft Affidavit. Once you fill out the form, print it out and attach it to your paper tax return. Mail the form and your return to the IRS.
You should also report this crime to the Federal Trade Commission. Finally, contact the three national credit bureaus of Experian, Equifax, and TransUnion to place a fraud alert on your credit reports.
How to avoid this scam: You can avoid tax-related identity theft by taking two key steps. First, keep your Social Security number and other personal information private. Never give out this information to someone who calls you, sends you a text or requests it in an email, even if the people contacting you say they are from the IRS. The IRS will never call, text or email you to ask for your Social Security number.
Next, sign up for the IRS’ Identity Protection Personal Identification Number (IP PIN). Once you sign up for this number, scammers will need to know your name, address, and Social Security number to steal your identity and your IP PIN.
You can find this scam-prevention tool online at Get an IPN. You’ll need to register an online account with IRS.gov first.
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Scam 2: Employee retention credit claims
In its 2023 Dirty Dozen list of tax-related scams, the IRS warns taxpayers to be on the lookout for scammers trying to trick them into claiming the Employee Retention Tax Credit.
This tax credit was enacted during the COVID-19 pandemic to encourage employers to keep their employees working. Employers could qualify for a tax credit of 50% of up to $10,000 in wages if their businesses were fully or partially suspended because of COVID-19 or if their gross receipts dropped by more than 50%.
The IRS says con artists are trying to convince ineligible taxpayers to claim the credit. These schemers often promise that taxpayers will receive large refunds if they do so.
The goal of these scammers? According to the IRS, many are trying to trick taxpayers into giving them their personal and financial information, claiming that they need it to file for credit.
Once scammers have taxpayers' personal information, they can then use it to file for loans or open credit cards in their names. They can also use this information to withdraw from their bank accounts or run up charges on their credit cards.
How to avoid this scam: The IRS will never call, text, or email you to inform you that you qualify for a tax credit. And the agency will never require you to provide it with your Social Security number, birth date, or other personal information before you can claim any credit. If you receive a message saying you qualify for a tax credit, check with the IRS first. You can reach the agency at 800-829-1040.
Scam 3: Smishing and phishing
The IRS also warns taxpayers to be wary when individuals claiming to be from the IRS send them texts or emails. According to the IRS’ Dirty Dozen list, the number of smishing – when scammers use text messages to contact taxpayers – and phishing – when they use email – is on the rise.
Often, con artists will text or email victims claiming they are due a refund. However, before the IRS can send the refund, they need the Social Security number, birth date, and taxpayer's address. Of course, if taxpayers provide this information, they won’t receive a refund. But the scammers will use it to access their credit card or bank accounts or open loans or credit cards in their name. They might also sell this information on the Dark Web.
In other cases, the scammers might use text or email to claim you owe money. They’ll then demand your personal information and maybe even a payment. They’ll then gain some cash and steal your personal information.
How to avoid this scam: The IRS says it will initiate contact with taxpayers through mailed correspondence. If you receive a text or email claiming to come from the agency, it’s probably a scam. It’s best to delete these electronic messages. The agency says it will never contact taxpayers through text or email regarding a bill or tax refund.
Scam 4: The gift card scam
Be especially careful during the holiday season: You might fall victim to the gift card scam.
In this scam, criminals trick taxpayers into paying a fake tax bill with gift cards. Typically, scammers will contact victims by phone or through text or email messages pretending to be an IRS agent. This scammer might then tell victims they owe money on their taxes that they must immediately pay or face criminal fines or jail time.
According to the IRS, The criminal will order victims to purchase gift cards that they must use to pay a fictitious tax penalty. Taxpayers are instructed to call, text, or email the scammer after they've purchased the cards. At this point, the criminals will ask the victims to provide the gift card numbers and PINs.
Once they have this information, these con artists will use it to make purchases for themselves.
How to avoid this scam: The IRS says it will never call, text, or email taxpayers to demand immediate payment using a specific payment method. This includes gift cards, prepaid debit cards, or wire transfers. Instead, the IRS will mail a bill to taxpayers who owe taxes. The IRS does not accept gift cards as a form of payment.
The IRS also won't threaten to have taxpayers arrested for not paying their bills. They won't threaten to revoke taxpayers' driver’s licenses, business licenses, or immigration status.
If any of that happens? Hang up or erase the text or email messages. You're dealing with a scammer.
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Scam 5: The Taxpayer Advocate scam
The IRS' Taxpayer Advocate Service can be a useful tool: It helps taxpayers solve any complicated tax problems. Unfortunately, scammers aren’t above tricking victims into thinking they are calling from this IRS service.
In the taxpayer advocate scam, criminals call taxpayers using a number that looks like it's coming from the IRS’ Taxpayer Advocate Service, which maintains offices in Houston and Brooklyn. These calls, often robocalls designed to automatically call hundreds of potential victims, leave a number and message on taxpayers’ voice mails, asking them to return the call.
When taxpayers call back – or answer when the call comes in – a scammer requests their personal information, including the victim's Social Security number or taxpayer identification number, to help resolve what they claim is a tax problem, usually one involving a misplaced refund or a bill that they say the taxpayers owe.
Once scammers have this information, they can steal their victims' identities.
How to avoid this scam: Don’t believe it when anyone says they are calling you from the IRS, even if this person is supposed to be calling from the Taxpayer Advocate Service. Agents working with the advocate service don't contact taxpayers randomly and never initiate contact by phone. Instead, taxpayers contact the Taxpayer Advocate Service first. Only then do agents from the service return their calls.
If you get a call claiming to be from the Taxpayer Advocate Service? Hang up. You can then call the IRS’ customer service number to see if there really are any problems with your taxes.
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Writer
Dan Rafter is a freelance writer who has more than 20 years experience covering personal finance. He's written for the Chicago Tribune, Washington Post, Bankrate, CreditCards.com, Rocket Mortgage, NortonLifeLock and several others.
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