Tax scams are more common than some people might expect. The IRS can be an intimidating agency, and most taxpayers do their best to avoid upsetting it. Some scammers use that to their advantage, threatening taxpayers into paying for fines they don’t owe or divulging information they should never be asked to provide over the phone.
Most tax scams involve some level of identity theft, tax refund theft, or fraud involving phony tax debt resolution schemes. During the pandemic, another common tax scam involved scheming people out of their stimulus checks. While the majority of tax scams are obvious and designed to prey on the most gullible, pressure and fear can lead to hasty decision-making, and can make a victim out of anyone.
Tax law is complicated. The average person does not know how the IRS works and wouldn’t dare to question someone identifying themselves as an IRS officer. It is important to learn how to recognize the difference between official IRS correspondence and a tax scam attempt, as well as know when and how to report scams to the proper authorities.
Common Tax Scams
IRS scams can generally be divided into three basic types: tax ID theft, IRS imposter schemes, and tax transcript scams. In addition, tax scammers may use multiple different avenues to scam their victims, including via phone, email, or chat services. The greatest protection against an IRS tax scam is knowing how and when the IRS will communicate with you, as well as being clear on the guidelines for how the IRS handles sensitive information.
As a rule, the IRS will never ask you to provide personal information via email or a messaging app. The IRS also limits what kind of information it will ask from you over the phone. In general, the only time you should be providing information to the IRS is via the official website, or when sending in a form or request via physical mail.
There’s also no harm in hanging up on someone claiming to be from the IRS and then calling the IRS or checking your tax account online to determine if what the caller said was true (i.e., claiming you owe taxes without first receiving a physical notice via mail).
Lastly, you can always ask a caller for the local IRS office address for an in-person appointment. If the caller refuses to give an address, this is a tell-tale sign of a scam. If they do give an address, it can be checked against the IRS website, and you can call the IRS back at their listed number.
Do Not Rely on Caller ID
Tax scammers can spoof their caller ID numbers to pretend that they’re calling from anywhere, including official government phone numbers. The IRS provides a few other security guidelines for taxpayers looking to avoid tax scams:
- Use security software on your mobile phone and computer and make use of a firewall.
- Use unique passwords or consider a password manager. If you write them down, keep that information in a secure, private location only you can access.
- Make backups of your important files on the cloud.
- Only login and provide personal information or credentials over encrypted websites (these utilize SSL certification – you can double-check that by looking for “HTTPS” at the beginning of a URL).
- Carefully read emails from supposed “trusted sources” and check for obvious typos or inconsistent formatting.
- Never click on a link on an email from an unverified source.
- Never download anything or click on any links from pop-up advertising.
- Do not open attachments on random emails.
- Talk to other family members about implementing better online security and developing security habits on the phone and computer.
In addition to keeping your information safe and secure, there are extra measures you can take to protect your tax information from potential tax scammers. Visit the IRS’s official website to obtain an Identity Protection PIN. This is a six-digit code you can use to verify any tax returns sent with your Social Security Number. This way, even if an identity thief obtains your SSN, they would be one additional security step short of filing a fraudulent tax return on your behalf.
Last but not least, do not heed threats. The IRS does not make calls with the intention of threatening taxpayers with jail time or arrest. An IRS officer will not email you asking for confidential information. They will not send you a document via an unsolicited email and claim it is a form. Any phishing attempts can be forwarded to the IRS directly via firstname.lastname@example.org.
IRS Imposter Scams
IRS imposter scams are a generalized term for any scam wherein the scammer identifies themselves as someone working for the IRS. The goal of an imposter scam differs from scheme to scheme. For example, some imposter scams are perpetrated over the phone, while others are done over email or even SMS. In general, imposter scams either:
Claim to Be Someone Collecting Taxes
In these cases, the imposter will be claiming that you owe taxes and will demand payment. They may ask you to pay via wire transfer, prepaid cards, or even gift cards. It should be noted that the IRS will never request payment by any of these methods. The best way to pay the IRS is through their government website, by mail, or in person at the local office
Ask You to “Verify” Your Personal Information
In these cases, scammers will utilize email or call conversations to determine sensitive information, such as a PIN, your SSN, or some other information. If someone claims to be from the IRS and demands payment over the phone, it is usually safe to ignore them. There are very specific channels through which you can pay the IRS for back taxes or make estimated tax payments. The IRS will not ask you for bank details or payment information via telephone or email. If at all, they may ask you to visit the IRS website to conduct an online payment for your taxes.
Any correspondence about back taxes and tax debt will be proceeded by a mailed notice. The IRS does not call out of the blue to discuss your tax debt. Keep an eye out for any notices in the mail. If you have your suspicions about a potential scammer, ask them for a badge number, name, and callback number. Contact TIGTA at 1-800-366-4484 to determine if the caller is truly an IRS employee and whether they have good cause to call you. If not, you can report the scammer to TIGTA right away. Otherwise, call them back. If in doubt about what to do, contact a tax professional right away if you have questions or feel uncomfortable with the contact.
IRS Phishing Scams and Identity Theft
Another serious IRS tax scam is tax ID theft. Utilizing phishing schemes or other means, scammers can collect enough information to create a fraudulent tax return on your behalf to claim your tax refund. You may not realize that a tax return has already been filed on your behalf until you try to e-file one and realize that your SSN has already been used that year. If you did not file a return but were notified of one having been filed for you, complete the IRS’s Form 14039, Identity Theft Affidavit, and send it to the IRS.
Alternatively, you may have received a 5071C letter informing you of your ID theft. Respond to the number on the letter, and go to the IRS Identity Verification Service. Every year, the IRS releases its annual list of common Dirty Dozen tax scams. Keep an eye out for this year’s list via the IRS Newsroom. Here is an example of the last four most common tax scams of 2021. If you have been, or suspect you have been, the victim of any type of tax fraud scheme, contact the appropriate agency as well as a tax professional.
Fake Tax Notices
Many below-board resolution firms, as well as some scammers, will use direct mail as a means to begin the contact. These mailing will have official-sounding language and be very threatening. They will appear to come from the IRS, but upon closer inspection, will usually have signs that they are not a real notice.
You can always look up the type of notice you received or compare it to examples on IRS and state websites. The best way to tell is to look up your account on the tax authority website, contact the authority on their website listed number, or contact a tax professional. Do not reply directly to the number listed on the mailing unless you are certain it is a legitimate government notice.