Unfortunately, tax scams have become as inevitable as filing your tax return. Over the years, thousands of people have lost money and had their personal information compromised. In addition to the risk of financial loss, falling victim to a tax scam can also result in legal problems, tax audits, and potential penalties or fines. That’s why it’s important to be vigilant, especially during tax season (though tax-related scams can crop up any time of year). While some tax scams are evergreen, new ones also crop up every year.
In this article, we’ll cover 7 tax scams you need to be aware of this season.
Scammers use regular mail, phone calls, email, and text messages to trick taxpayers, businesses, and tax professionals. Remember, the IRS will never request personal or financial information over email, text message, social media, or phone calls. If there’s an issue with your tax return, they will usually send you a notice or letter. You can always call the IRS directly if you’re unsure about the authenticity of any communication you received.
Recognizing Phishing Messages and Websites
Phishing is a type of cyber scam in which fraudsters pose as real companies and institutions over email, text, or social media in an attempt to have you send money or share login credentials and other sensitive information. Learn how to recognize phishing attempts so you can protect yourself from tax scams this season.
If you receive an email purportedly from the IRS or other tax industry professionals, including tax software companies, don’t download attachments or click on links you weren’t expecting. Scammers target your emotions, using threats to pressure or scare you into sharing sensitive information, clicking on a link, opening an attachment, or sending money on the spot. These phishing schemes often involve fraudulent use of the IRS name and logo. The content of the messages may be related to tax refunds, filing status, confirmation of personal information or PIN, and transcripts. The IRS doesn’t request Life Insurance and Annuity updates from taxpayers or your tax preparer. They also won’t send you an email instructing you to “update your IRS e-file immediately.”
IRS-impersonation messages, whether sent via email or text, may include links to phishing websites that look like the official IRS website. They either ask for your personal information so they can file a false tax return in your name, or they infect your computer with malware to steal sensitive information and data. IRS-impersonation emails have also been targeting college students, staff, and faculty with a .edu email address.
Pandemic-related phishing emails continue to go out, targeting tax professionals who are still working remotely and mostly communicating with clients over email.
If you’re unsure whether a message is legitimate, , contact the IRS directly to see if there is an issue with your taxes.
Phone Scams
Similar to IRS-impersonation messages, scammers will call you with an altered Caller ID to make it look like it’s the IRS. They pose as IRS agents with fake names and ID numbers and claim that you owe money to the IRS. Then they use threats and pressure to say you must pay right away with a gift card or wire transfer or risk arrest, deportation, or suspension of your business or driver’s license.
Remember that the IRS will never call to demand immediate payment or specify the payment method you must use. The IRS usually sends tax bills through the mail. You also have a chance to question or appeal the amount owed. And the IRS doesn’t threaten taxpayers with arrest, deportation, or other consequences. If this happens to you, hang up and report the call to TIGTA or the IRS.
Identity Theft
Be on the lookout for identify theft–criminals may use your personally identifying information to file a tax return in your name and claim your refund. They may also file a fraudulent claim for unemployment compensation, which counts as taxable income. If you receive a tax form for unemployment compensation you didn’t file for, contact the IRS.
Identity theft is a big problem in many types of scams, not just tax-related ones. Protect your personal data by creating unique logins for each online account, avoiding public WiFi when shopping online or logging into a bank account, and regularly checking your credit report and bank/credit card statements. If you see any suspicious activity, report it immediately.
Tax Preparer Fraud
Watch out for “Ghost” tax preparers who won’t sign your tax return, a rising issue in 2024. This is a huge red flag that the preparer may not actually be authorized to do tax returns. Another red flag is someone who promises a big refund or charges fees based on the size of your refund.
Vet tax preparers carefully before sharing any information or making a payment. All legitimate tax preparers will have a Preparer Tax Identification Number (PTIN) issued by the IRS. You can also check online reviews, ask for references, and look up the preparer’s record with the Better Business Bureau.
Fake Charities
Unfortunately, scammers will take advantage of your generosity and desire to help by posing as a real or fake charity and soliciting donations. Any “donations” made to a scam cannot be deducted on your tax return.
To protect yourself, research the charities you want to donate to instead of responding to solicitations. Visit the charity’s website directly instead of clicking on a link in an email or digital message. You can also check the charity’s status on the IRS’s Tax Exempt Organization Search.
Unclaimed Refund Mailing
While the IRS does legitimately send snail mail, this scam tries to trick taxpayers into thinking they’re owed a refund. These mailings arrive in a cardboard envelope from a delivery service. Inside is a letter on a fraudulent IRS letterhead with contact information that does not belong to the IRS. So, ignore any mail about your “unclaimed refund.” This is not from the IRS.
Tips for Safe and Secure Tax Filing
The sooner you file your taxes, the better. This reduces the window in which scammers could file a false return in your name. Signing up for a direct deposit of your refund is also a faster and more secure way to get it.
You can file your return online, either through the IRS’s website or through tax software. If you use a tax professional, they will file your return electronically for you. You should hold on to your tax returns and supporting documents for at least three years in case of an audit. When disposing of old tax paperwork, make sure to securely shred it instead of tossing it in the trash or recycling bin.
Stay Informed: Keep Up with Latest Tax Scams
Knowledge is power when it comes to tax scams. Check the IRS’s “News” page for postings about the latest scams, as well as their dedicated Tax Scams/consumer alerts page.
Lone Star National Bank is here for you during tax season and always, so . feel free to reach out to us with any questions.
