In 2017, 1 in 15 people became a victim of identity theft. While crooks steal your personal information for many different reasons, tax scams are one of the most common schemes that these criminals cook up. From posing as phony IRS agents to collecting money for fake charities, tax scams can take many forms and beguile hardworking taxpayers all over the United States.
So how do you protect yourself and your information from being stolen? And if it already has been stolen, what do you do next? Use the links below to jump to a specific section or keep reading for a full review on how to boost your defenses against IRS tax scams this spring:
Most Common Types of Tax Scams
Identity thieves are always devising new ways to steal your tax information, so make sure you’re familiar with the most common types of tax scams before filing your return.
Fake IRS Phone Calls
The most widespread tax scam out there are phony calls from people pretending to be an IRS agent. Scammers will often try to bully you into sending money to settle a fictional debt by threatening involvement from law enforcement, such as police or immigration officers. It’s common for the fake agent to request your bank account information or demand you send a payment via wire transfer or prepaid gift card.
The important thing to remember is that the IRS rarely contacts taxpayers by phone. The real IRS will always mail correspondence with taxpayers through the United States Postal Service and never demand payment without the opportunity for the taxpayer to challenge their claims. Additionally, they will never:
- Threaten to bring in law enforcement if you don’t meet their over-the-phone demands
- Ask for your credit card or debit card number over the phone
- Call about taxes owed without having first mailed you a bill
If you receive one of these phone calls, ask for the caller’s name, title, and phone number, and then hang up. Call the IRS at 1-800 829-1040 to report the suspicious phone call.
Similar to fake phone calls, phishing is a type of tax scam where you receive emails that claim to be associated with the IRS. They often include links to click or files to download that may appear legitimate, but are meant to steal your personal information. Common phishing email subjects include:
- Claiming your tax refund through a clickable link
- Paying outstanding debt by providing your information through a website form
- Fixing a compromised bank account or credit card issue by giving away your personal info
The IRS never reaches out by email, and you should never open up any attachments in phishing emails in case a hacker has included a computer virus within the attachment.
Organizations or individuals posing as a charity will try to solicit donations from taxpayers in order to avoid paying taxes. Be cautious of charities that have names similar to nationally recognized groups, and always use the IRS Exempt Organization tool to confirm whether or not they’re legitimate if you’re suspicious of a charity scam.
False Tax Preparers
Uncertified preparers can be one of the most dangerous tax scams, because they have access to all of your personal information. Be sure to check that they are enrolled with the IRS and to never hire a preparer who doesn’t want to see your records or receipts before filing.
Be cautious about any person or organization advertising schemes to shield your money from taxation. Abusive tax shelters are prosecuted by the IRS and often steal taxpayer money as part of their illegal activity.
Falsifying Income or Deductions
Both of these IRS filing scams originate from fraudsters who obtain your information and file a false return. Once the larger-than-expected return hits your account, they steal it for their own nefarious purposes.
What to Do If You are a Tax Scam Victim
If you accidentally fall victim to one of these tax scams, immediately report it to the IRS. Be sure to:
- Fill out an IRS Identity Theft Affidavit (Form 14029) that provides all the necessary details for the IRS to open an investigation
- File a report with the police
- Contact your bank and credit card companies to let them know about the fraudulent activities so they can monitor your accounts
- Return any phony refunds that have already been deposited in your bank account to the IRS
- Report any phishing emails at firstname.lastname@example.org
- File a complaint with the Federal Trade Commission (FTC)
As with many other matters, the IRS can move slowly with cases of identity theft. If you report tax fraud to the IRS and the scam is taking a significant financial impact on you, contact your local Taxpayer Advocate Service to help resolve your case more quickly.
How to Prevent Tax Scams
While there’s no surefire way to stop IRS tax scams 100% of the time, there are several steps you can take to prevent it from happening. Before tax season rolls around, make sure you’ve heightened your defenses against scammers by:
- Filing your return as early as possible. Thieves won’t be able to steal your refund if you already have it.
- File taxes online through a secure Internet connection. The best device for e-filing is your home computer and not a device that uses public WiFi, such as a library computer.
- Using strong passwords to protect your information. If you have trouble remembering your passwords, write them down in a journal instead of saving them digitally where hackers could find them.
- Hiring a legitimate tax preparer who is enrolled with the IRS. Always ask for their IRS Preparer Tax Identification Number to ensure they are certified. For CPAs, check your State Board of Accounting to make sure they are qualified.
- Hanging up on suspicious phone calls and ignoring emails that look like they may be a phishing scam.
- Keeping track of tax documents in a secure manner. Either digitally store copies of all your paperwork on a portable hard drive or organize physical copies in a filing cabinet.