So, we are about to come upon tax season… yay?
Tax season is usually painful because we have to pay the government a bit of what we earn. For the majority, they receive discounts, credits and breaks that yield a refund or a low tax bill. For others, not so much.
However, whether you are expecting a nice refund, or have a few thousand dollar bill, one thing remains constant – there are a bunch of tax and IRS scams this time of year.
Tax scams are so prevalent this time of year, because, in all truth, they work REALLY well this time of year. People are already stressed out about money. Adding in another factor that alters what your household has means even more stress.
Imagine expecting a $10,000 tax refund. Then, out of the blue, you receive a call sternly telling you that you were overpaid by $2,000 and have to pay this balance as soon as possible … “otherwise”.
That would throw anyone into a spiral of stress and panic.
And this is where the IRS scam and tax scams are born. This intersection of loss, gain, worry and stress is a hotbed for scams that many Americans, unfortunately, fall victim to.
In this article, we are going to break down the IRS scams and tax scams currently being seen and reported. We’ll discuss ways to verify and safeguard yourself. As well, we’ll look at other ways to better see and address red flags that may not be as clear as others.
Common IRS and Tax Scams
Before we begin, I want to let you know, EVERYONE is a target for scammers. The reason? Everyone has something to lose.
If you have successfully been victimized by a scammer, please report it. Scams are continuous, and scammers do not stop. The best thing to do is remember that you are not alone. Report the crime, and help the other millions of Americans who have been victimized.
Phishing Emails
Phishing emails have been around since the mid-90s. Using a communication system so easily trafficked by normal people is a battlefield for scammers and fraudsters.
For the IRS and Tax scammers, emails are a simple and automated method of trying to scam you.
The most simple attempts at this scam are to send an email with a title like:
IRS Incident Account: #904040-A049-3910 / OVERPAYMENT
In the email, the person has told you that a specific amount like $609.87 or $2,409.94 has been overpaid to you. As such, you NEED to repay this as soon as possible.
They usually direct you to call a number, reply to the email, or worse, to pay via crypto at their included IRS crypto address.
Red Flags:
The IRS will not email you about such things. There are two ways that the IRS manages this: 1) wage garnishment or 2) a certified letter with your actual sensitive identifiable details (like SSN, Name, Address, AGI, etc).
Usually, in phishing scams, there are really poor grammatical mistakes. Sometimes these are misspellings, but you can also have poor punctuation choices (commas instead of periods), or foreign dollar values (some countries use a comma between dollars and cents as in $513, 99).
Fake IRS Websites
Fake IRS websites (and scam tax payment portals), are another common issue during the email phishing scams. These websites have a similar layout and branding as the IRS website, but there are always things that are a little “off”.
For instance, spelling. Usually, you will find horrible spelling mistakes on what is considered “the most used” government website in the United States. Big red flag there.
Also, notice that the link you receive in your email might say “irs.gov”, but when you mouse over it, it could actually end in a .com, .ch or a .ru, instead of .gov. This usually means the link is obfuscated and masking the real website you are going to.
At the end of the day, just remember, the IRS will NEVER email you about a payment due or give links to make those payments. Go to the IRS website and verify that your return has been received and that you don’t owe anything.
Phone Scams (“The IRS is Calling You!”)
Imagine sitting at home, enjoying a meal, and your phone rings. You look and it reads “United States IRS”. You answer and a voice on the other end of the line coldly starts talking to you about your tax return status, asking questions for verification of your identity and then telling you that you owe the government over $10,000!
Way to ruin the mood, right?
Luckily, this is a scam call. So, you hang up.
For others, though, they don’t hang up. And are unlucky enough to believe the voice on the other end of the line. They provide too much information. As well, they make payments that they never owe. And, now, they have lost that money forever.
How did this happen?
Chances are the scammer used a very simple characteristic of most humans to gain influence – authority. They impersonate an IRS agent or Sheriff or police officer. They warned of pending litigation, lawsuits and arrest. They spoke of immediate payment to avoid immediate negative action.
Remember, if you ever receive any contact from anyone of authority (an IRS agent, the FBI, the Sheriff, law enforcement, your financial institutions, etc), immediately stop contact, find the number and call those places.
Stop, delete, verify.
What are some red flags for this scam?
First things first, the IRS will not call you demanding a payment. They are larger than that. They garnish wages and let you know in a certified letter afterwards. They send a certified letter with payment details and personally identifiable information for your validation.
Another is the fact that the IRS agent cannot give you any further details. You can ask for verification of certain details, or just wait the conversation out. Likely, they do not know your SSN let alone your address or full name.
Finally, the IRS will never require payment over the phone. Especially, they would never ask for payment via gift cards, Western Union wire or crypto.
Fake Tax Preparers and Refund Fraud
Preparing taxes and submitting them to the IRS can be simple with a service or create a ton of confusion if you do it yourself.
Recently, we have heard about reports of companies that are advertising as tax preparers. They promise larger than normal refunds, hidden tax loopholes and more.
Really, they are making big promises that they cannot deliver on.
This situation isn’t bad because of the false promises… the situation is bad because you could end up giving your information over to someone who intends to steal it.
Think about this…
When you file a tax return, you in essence are transmitting a lot of information to the IRS. You are letting them know what your income is, assets, dividends, investments, businesses, losses and personal details like where you live, who you work for and your SSN.
If someone is maliciously gathering your details under the guise of help, and turning around and using them, that isn’t really helpful, is it?
Red flags and warning signs:
First, never use a tax preparer that you clicked on an ad for and never met with. If you clicked on an ad and they can only meet with you over the phone or over a messaging app, that is a problem.
Next, make sure that they are actually recognized tax preparers. The IRS holds a directory for tax preparers that are registered and licensed. You can find it here: https://www.irs.gov/newsroom/irs-reminds-taxpayers-choose-a-tax-professional-carefully.
Lastly, much like personal injury lawyers, marketing consultants and investors, if someone says “we are going to get you more money than those other guys”, or something similar, you might be getting swindled.
Identity Theft and Tax Return Fraud
Here’s a scenario…
It’s April. The snow is finally going away. The sun is a bit warmer. And, you’ve finally gotten around to getting all of your receipts and paperwork for your income tax filing.
You start filling things out with your tax preparer or tax preparation software.
Everything is going smooth, then you click submit or send in your filing. Great! Done and Done!
About 4 weeks later, you get a certified letter in the mail stating that your tax return had already been submitted in February. In “that” filing, you received a refund of $7500. And, the money went to another city and another state… and to someone else!
What happened?
Your identity was taken and your IRS filing was stolen.
There are a few things that you can do to prevent this.
The first is to use a special 6 digit passphrase that ONLY you and the IRS know. You can gather this from the IRS.gov website.
The other is to fill out and submit your tax return as soon as possible; the faster, the better.
Something else you can do is check the status of your return, and previous returns, via the IRS’s online portal. This helps to monitor anyone else trying to submit another tax return in your name with your details.
How to Protect Yourself from Tax Scams
Now, let’s talk about some ways to protect yourself from Tax scams and IRS scams. We will look at some issues discussed above. As well, we want to give you some actionable plans on what to do in case you feel like you are about to be scammed.
Know How the IRS Actually Contacts You
As said before, the IRS will contact you in one way – via the USPS. You will get a physical letter in the U.S. mail which will be a) a bill or b) a receipt of your wages being garnished.
That is it!
The IRS will not call you, text, email you, send a direct message on social media, etc.
If you think that the piece of mail, call or whatever form of communication that you are receiving is a scam and not from the IRS, immediately stop the communication and contact the IRS directly.
Secure Your Personal Information
The biggest tip we can give you is to keep your information secure, everywhere, all the time.
This means super-sensitive information like your social security numbers, driver’s license number, bank accounts details, etc. It also means keeping your other personally identifiable information secure like your name (and maiden name), address, email, phone and other details.
As well, you need to use strong passwords to safeguard that data where ever it is housed. So, your bank login should be secure using a strong password, your IRS.gov login should be secure, your credit details should be secure – every time you use a password, it should be a strong password!
BONUS TIP!
We have a big article about password security, that includes a FREE password security tool here: https://firstchoicefcu.com/first-choice-fcu-fraud-scam-prevention-center/the-secret-to-strong-passwords-a-hackers-worst-nightmare/
Choose a Reputable Tax Preparer
A simple item that you can do yourself is to verify your tax preparer. They should be registered and licensed with the IRS.
As well, never trust a tax preparer that refuses to meet you online or only accepts payments in non-trackable payments; crypto, digital wallets, digital payments, etc.
File Your Taxes Early
Early tax return filing reduces the chances of someone fraudulently using your social security number to file.
You should also use the IRS’s web portal! The portal allows you to register an annual secure six-digital PIN for filing your tax return. As well, the portal allows you to handle payments, review past returns and more.
What to Do If You Fall Victim to a Tax Scam
What if you’ve done everything you can to protect yourself, safeguard your information and make sure you don’t get scammed, but you still fall victim?
We are going to now look at what can be done if you are targeted by a scammer. Then, we will cover how to handle identity theft and fraud issues. Finally, we’ll discuss exactly what to do to report these scammers and frauds.
If You Receive a Suspicious IRS Call or Email
Simple – do not respond.
When you receive a call, text, email, direct message or anything but a letter in the mail, dismiss it. You should then block the number, and stop engaging with the person calling, texting or emailing you.
Then, verify the actual issue. That means contacting the IRS directly to determine if there is an issue.
Remember…
Never Trust, Always Verify!
If You Suspect Identity Theft
The first thing to do is place a fraud alert with the “Big 3” credit bureaus. These are Experian, Equifax and TransUnion. Even before this happens, it’s always a good idea to think about freezing your credit until you need to use it again.
Next you should contact the IRS Identity Protection Specialized Unit. You can do this by calling 1-800-908-4490.
For more information on the IRS Identity Theft Victim Assistance, you can visit this page: https://www.irs.gov/individuals/how-irs-id-theft-victim-assistance-works
How to Report IRS Scams
If you are a victim of an IRS Scam or a Tax Scam, you really should report it. The more information on scams that government organizations have, the more measures that they can put into place to protect people, as well as catch the perpetrators.
Who do you contact?
First, contact the FTC, or Federal Trade Commission. Report identity theft at IdentityTheft.gov or call 877-438-4338.
Next, you can visit the Internet Crime Complaint Center at https://www.ic3.gov/. You can file a complaint about identity theft, along with details of the scam.
Finally, contact the IRS at https://IRS.gov. Here you can also find information about identity theft, including tips and a guide for assistance.
Final Conclusions
P.A.V. is the acronym to keep in mind when thinking about your personal security and preventing yourself from becoming a victim of Tax Scams and IRS Scams.
First, be Proactive in securing your personal data. Make sure that you use strong passwords in any system that stores or uses your information. As well, stay vigilant in educating yourself of current and evolving scams and security measures to prevent them.
Next, stay Aware of security needs and your personal data’s security. Make sure that you stay educated in terms of current and evolving scams. As well, know where you are entering, inputting, storing and securing your information.
Finally, Verify EVERYTHING! If someone calls, text, emails, messages, mails, smoke signals, carrier pigeons you… anything…
Verify everything.
Remember the saying that every security expert uses: Never Trust, Always Verify.
For further information on scams, you can review other articles in our First Choice FCU Fraud And Scam Center.
Other resources to gain more information: