Cecily Zamora
With tax season comes tax scams, and scammers are always coming up with new ways to target unsuspecting taxpayers. The Internal Revenue Service (IRS) has a page dedicated to helping taxpayers recognize and report tax scams and fraud. The IRS also works with other agencies to combat the growth of scams and schemes threatening taxpayers and tax systems. While the IRS provides resources to help taxpayers protect themselves, there are also laws in place to punish offenders. For example, if you suspect or know of an individual or business that isn't complying with tax laws or hasn't paid the tax they owe, you can report them using Form 3949-A, Information Referral.
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What You'll Learn
Tax scam warning signs
Tax scams are a serious issue, and it is important to be vigilant and aware of the warning signs to protect yourself and your finances. Here are some key warning signs to look out for:
Unexpected Communication
Be cautious of unexpected letters, emails, texts, or calls claiming to be from the IRS or other trusted sources, such as banks or tax software providers. Scammers often use this tactic to trick people into providing personal or financial information. Always verify the sender's identity and be wary of suspicious links or attachments.
Urgent Payment Requests
Scammers often create a sense of urgency by demanding immediate payment with threats of arrest or deportation if you don't comply. They may insist you "pay now or else" and not allow you to question or appeal the amount. The IRS will not threaten or pressure you in this way.
Misleading Information
Scammers may provide incorrect information about tax refunds, credits, or payments to confuse and deceive taxpayers. They may claim you are owed a large refund or that you are eligible for secret tax credits. They may also give bad tax advice on social media, encouraging you to lie on tax forms or make false claims. Always verify this information through official channels and consult reputable sources for tax advice.
Identity Theft
Criminals may use your personal information to file fake unemployment claims or steal your tax refund. If you receive a Form 1099-G showing unemployment compensation you didn't receive, it could be a sign of identity theft. Scammers may also send fake tax bills or target businesses to steal Form W-2 data. Always protect your personal information and be cautious of unexpected requests for sensitive data.
Impersonation and Scare Tactics
Scammers often impersonate IRS officials or other authorities to appear legitimate. They may use intimidating language or scare tactics to pressure you into providing information or money. Remember that the IRS has specific protocols for contacting taxpayers, and they will not threaten or demand immediate payment.
It is crucial to stay informed and vigilant to protect yourself from tax scams. Always verify the legitimacy of any communication, be cautious of urgent demands, and seek official sources for tax-related information and advice.
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How to report a tax scam
Tax scams are illegal, and there are several ways to report them. The Internal Revenue Service (IRS) provides guidance on how to report tax scams or fraud and the different types of scams one should be aware of.
Firstly, it is important to verify whether you are dealing with the IRS or a scammer. The IRS does not initiate contact via email, text, or social media to request personal or financial information. If you receive an email, text, letter, or call claiming to be from the IRS, it might be a scam. Similarly, be cautious of social media posts about how to get a large refund, as these may be scams or sources of bad tax advice. The IRS also warns taxpayers to watch out for "Offer in Compromise 'mills'," where promoters claim their services are needed to settle IRS debts, and impersonation mail that misleads people about unclaimed refunds. Scammers may also send a tax bill to trick people into paying them, or provide incorrect information to mislead people about how to get a bigger refund.
If you think you have been scammed or had your information stolen, you should report it. If your Social Security number (SSN) or individual tax identification number (ITIN) was stolen, report it to IdentityTheft.gov, and then to the IRS by calling the number on the notice. You can also complete and submit Form 14039, Identity Theft Affidavit, online or by mail. If your EIN was stolen, file Form 14039-B, Business Identity Theft Affidavit, or contact the IRS at 800-908-4490. Most scams can be reported with Form 14242, Report Suspected Abusive Tax Promotions or Preparers, which can be submitted online, by mail, or by fax.
To report a tax preparer who filed a fraudulent return, use Form 14157, Return Preparer Complaint, which can also be submitted online or by mail. If you suspect an individual or business isn't complying with tax laws or hasn't paid their taxes, you can report this online or by mail with Form 3949-A, Information Referral. If you have specific, timely, and credible information about tax underpayments or violations of internal revenue law, you can file a whistleblower claim for an award.
If you believe a tax preparer disclosed your tax return to an unauthorized person, or claimed a fraudulent Employee Retention Credit, you can submit a complaint to the U.S. Treasury Inspector General for Tax Administration (TIGTA). TIGTA also handles complaints regarding IRS employees filing false tax returns, bribery, and IRS impersonation.
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Common tax scams
Tax scams are a serious issue that can cause significant financial harm and put individuals at risk of identity theft. Scammers are active all year round but tend to increase their efforts during tax season. Here are some common tax scams to watch out for:
Employee Retention Credit Scams: The IRS has warned businesses and tax-exempt groups about misleading Employee Retention Credit scams. Scammers may claim to help businesses claim credits they are not eligible for, leading to potential penalties and investigations.
Identity Theft Scams: Scammers may target individuals to obtain their personal information, such as Social Security numbers, through phishing attacks or data breaches. They then use this information to file fraudulent unemployment claims or steal tax refunds. It is important to protect your personal information and be cautious when providing sensitive details.
Impersonation Scams: Scammers may pose as IRS agents or tax consultants to mislead individuals about tax refunds, credits, or payments. They may pressure people to provide personal, financial, or employment information or demand immediate payment of taxes to avoid arrest or deportation. Be cautious of any threats or demands for immediate action, and always verify the authenticity of the IRS contact.
Social Media and Influencer Scams: Bad tax advice on social media can mislead individuals into lying on their tax forms or claiming credits they are not eligible for. Influencers may promote false information about tax secrets or encourage followers to take advantage of loopholes. Always refer to official IRS sources for accurate tax information.
Gift Card Scams: Scammers may contact individuals, posing as IRS agents, and demand payment of back taxes using gift cards. They may also offer to help maximize refunds and request personal and financial information. Be cautious of any requests for gift card payments or demands for immediate action.
It is important to stay vigilant, be cautious when providing personal information, and verify the legitimacy of any IRS-related communication. If you suspect a tax scam, report it to the IRS and take steps to protect your identity.
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How to avoid tax scams
While there are laws and agencies in place to prevent tax scams, fraudsters are always finding new ways to scam people. Here are some ways to avoid being a victim of tax scams:
Know the Common Scams
Tax scams often involve criminals impersonating IRS agents, other government employees, or debt collectors. They may contact you via phone, text, email, or regular mail, demanding immediate payment for taxes, penalties, or fees you may not actually owe. They may also try to trick you into divulging sensitive information, such as Social Security numbers, tax identification numbers, or photo IDs. Be aware that the IRS will never demand payment or personal information over the phone or via email.
Be Wary of Unsolicited Advice
Be cautious of unsolicited tax advice, especially on social media. Influencers or promoters may convince you to lie on tax forms or claim credits you are not eligible for. They may also spread misinformation about non-existent tax credits or suggest that the IRS is keeping certain credits secret. Remember that taking tax advice from unqualified individuals can lead to serious consequences, including fines or criminal charges.
Be Vigilant During Tax Season
Scammers are particularly active during tax filing season. Be extra vigilant during this period and watch out for the warning signs of scams, such as demands for immediate payment, threats of legal action, or requests for sensitive information. Review the IRS "Dirty Dozen" list, which highlights common scams and fraudulent activities to be aware of.
Protect Your Personal Information
Never provide personal or financial information in response to an unsolicited email, text, or phone call. Do not click on suspicious links or open attachments from unknown senders, as they may contain malware. If you receive a suspicious communication claiming to be from the IRS, verify the legitimacy by contacting the IRS directly through their official website or a verified phone number.
Report Scams and Fraud
If you suspect a tax scam or fraud, report it to the IRS immediately. You can do this by calling their dedicated hotline or submitting relevant forms online or by mail. Your report can help protect others from falling victim to the same scam. Additionally, if your personal information has been compromised, take the necessary steps to protect your identity, such as filing a report with IdentityTheft.gov.
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Tax scam risks
Tax scams can cause serious financial harm and put you at risk of identity theft. Scammers are active throughout the year, but they are particularly active around tax season. Here are some common tax scam risks and how to protect yourself:
Misleading Information and Impersonation: Scammers may pose as official entities, including IRS impersonators, to offer tax advice or assistance with filing casualty loss claims or obtaining large tax refunds. They may contact you via email, text, letter, or phone call, or through social media posts, providing misleading information about tax refunds, credits, and payments. They may also send you a fake tax bill to trick you into paying them. Be cautious of odd or misspelled web links that may direct you to harmful sites. Always verify that you are interacting with the official IRS website or representatives.
Pressuring for Personal and Financial Information: Scammers may pressure you to disclose personal, financial, or employment information. They often target individuals over the age of 65 or nearing retirement, tricking them into withdrawing from their retirement accounts. Be cautious of anyone requesting sensitive information, especially if they create a sense of urgency or use threats of arrest or deportation. The IRS will not initiate contact via email, text, or social media to request personal or financial information.
Stolen Tax Refunds and Identity Theft: Scammers may steal your tax refunds by filing fake unemployment claims or exploiting data breaches to submit fraudulent claims on your behalf. They may also steal your identity by acquiring sensitive information, such as your Social Security number, through phishing attacks or other means. Always protect your personal information and be vigilant about potential identity theft, especially during and after the tax season.
False Claims and Compliance Risks: Be cautious of false claims and scams involving Form W-2 wages, Fuel Tax Credit claims, and Employee Retention Credit claims. These scams can generate compliance risks for individuals and businesses claiming credits improperly. Stay informed about the latest scam warnings and be cautious when filing or claiming credits to avoid penalties and investigations.
To protect yourself from tax scam risks, stay informed about common scams, be vigilant about your personal information, and verify the legitimacy of any tax-related communications or advice you receive. Report any suspected scams or fraud to the IRS and take the necessary steps to protect your identity and finances.
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Frequently asked questions
The IRS and other government agencies warn taxpayers about misleading claims on social media, such as non-existent "Self-Employment Tax Credits". Scammers may also impersonate the IRS, pressuring you for personal, financial, or employment information, or money. They may also threaten you with arrest or deportation.
If you think you've been scammed, had your information stolen, or suspect someone isn't complying with tax laws, you should report it. If your Social Security Number (SSN) or individual tax identification number (ITIN) was stolen, report it to IdentityTheft.gov and the IRS.
You may receive correspondence from the IRS about a return you didn't file, or that someone else accessed your IRS online account. You might also be unable to file a return because a duplicate Social Security Number has already filed one.
You can protect your personal information by filing your tax returns as early as possible and verifying that you're communicating with the IRS. Keep your software updated on all devices, especially those that connect to the internet. Be cautious of unsolicited messages prompting you to click on a link.
Participating in illegal tax avoidance schemes can result in imprisonment and fines, as well as the repayment of taxes owed with penalties and interest.
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