Tax season is a prime time for scammers, but they are active throughout the year. According to the Federal Trade Commission, Americans lost $8.8 billion to fraud and scams in 2022.
This highlights the need to stay alert at all times, not just during tax season.
In this blog, we will explore common IRS scams where criminals pretend to be IRS agents or other officials to trick you into paying money you don’t owe. We’ll show you the latest tricks these scammers use, give you tips on how to spot them, and tell you where to report them if you suspect a scam. Stay safe and protect your money by staying informed.
Latest IRS Scams
IRS scams usually involve fraudsters pretending to be IRS agents, government employees, or debt collectors. They try to trick you into sending money for taxes, penalties, or fees that you don’t really owe. These scams often happen over the phone, through text messages, online, or in the mail.
Below, we’ll share a list of recent IRS scams, give you tips on how to recognize a scam and tell you where you can report any suspicious activity.
- Tax Refund Scams: You might receive an official-looking letter, seemingly from the IRS, claiming you’re due for a refund. To claim it, you’re asked to provide personal details like your driver’s license and Social Security number via email. Remember, if an unexpected tax refund offer seems too good to be true, it probably is. Watch for signs like wrong contact details, strange formatting, or outdated tax information that signal a scam.
- Employee Retention Credit Scam: Business owners, beware of scammers pushing you to apply for the Employee Retention Credit, even if you don’t qualify. These scammers might aim to steal your tax information or charge high fees for application help. The IRS has set up a program for withdrawing fraudulent claims without penalty to combat this.
- Fake W-2 Scam: Faking your tax return to claim a larger refund is illegal. Scammers might encourage you to lie about your income or deductions on social platforms. Remember, the IRS also receives a copy of your W-2 from your employer and will know if your numbers don’t match up.
- Donation and Charity Scams: When making charitable donations, ensure the charity is legitimate by checking the IRS’ TEOS tool. Scammers might pressure you to donate quickly or in suspicious ways, like using gift cards or wire transfers.
- Tax Debt Scam Calls: U.S. tax experts scam calls when fake IRS people call you and say you owe them money for taxes. They threaten bad stuff like going to jail if you don’t pay right away. They might even fake their caller ID to look like the real IRS. They’ll ask for weird ways to pay, like gift cards or wire transfers, which the real IRS doesn’t do. Remember, the real IRS usually sends letters, not calls, and they don’t demand fast payments over the phone.
- Turbo Tax Scams and Tax Software Scams: Scammers may send phishing emails that appear to be from popular tax software brands like TurboTax, asking you to click on a link and enter personal information to update your account or view your tax return. Such emails often target college students using “.edu” email addresses. Always ensure you’re using the official website or a secure app when filing your taxes electronically.
- IRS Account Sign-up Scam: If someone offers to help you set up an IRS online account, be cautious. It’s a tactic to steal personal information. You should set up your IRS account alone through the official IRS website for free.
- Casualty Loss Scams: After natural disasters, scammers may reach out, pretending to be IRS agents or charities, to help file casualty loss claims and steal personal information. Always use the IRS’ official disaster assistance contact instead of responding to unsolicited requests.
- Identity Theft Scam: In this scam, someone may call claiming to be an IRS agent, telling you your identity has been stolen and used to open fake bank accounts. They may instruct you to buy gift cards and later ask for the access numbers. Remember, the IRS will never ask for payments via gift cards.
- Ghost Tax Preparer Scams: If you’re paying someone to prepare your tax return, ensure they have a valid preparer tax identification number and that they sign your return. A preparer who doesn’t sign the return is likely a “ghost preparer,” looking to charge a fee and then disappear.
Being aware of these scams can help you protect your personal information and avoid falling victim to fraud. Always approach unsolicited communications about your taxes with caution, and when in doubt, contact the IRS directly through their official website or hotline.
How to Identify IRS Scams?
It’s highly unlikely that the IRS will make unannounced visits to your home or business, as the agency has reduced such visits significantly. Generally, unless there’s a serious issue like a subpoena, summons, or potential seizure of assets, the IRS will not show up unannounced. Instead, they will contact you first through mailed letters to schedule any necessary meetings.
Be alert for these common signs of IRS scams:
- Unexpected Calls: The IRS typically contacts taxpayers through mail, not by making unsolicited phone calls.
Pre-Recorded Voicemails: Authentic IRS communications will not include urgent or threatening pre-recorded messages. - Suspicious Emails: The IRS does not email taxpayers to request personal or financial information. Remember, the official IRS website is IRS.gov — watch out for incorrect domain names like IRS.com or IRS.org.
- Text Messages: Similar to email, the IRS will not send text messages asking for personal or financial details.
- Social Media Messages: The IRS does not use social media to request personal information.
- Unknown IRS Forms: Always verify the legitimacy of IRS forms by checking their presence on the official IRS website. If you can’t find the form, it’s likely fraudulent.
- Identification Verification: Real IRS agents can provide two forms of identification: a pocket commission and an HSPD-12 card. You can verify an agent’s HSPD-12 card by calling the IRS directly.
- Payment Requests Over the Phone: The IRS will never ask for credit or debit card numbers over the phone.
- Gift Cards or Prepaid Cards: Be wary if you’re asked to pay your taxes with gift cards or prepaid debit cards. Legitimate tax payments should be made to the U.S. Treasury.
- Threats of Legal Action: The IRS does not threaten to arrest, deport, or revoke licenses. If you’re faced with such threats, it’s a scam. Remember, you have rights under the Taxpayer Bill of Rights to question or appeal your tax dues.
Recognizing these signs can help you avoid falling victim to IRS scams and protect your personal information.
Verifying and Managing IRS Debt Responsibly
If you’re concerned about possibly owing money to the IRS, check directly and for free by visiting your tax account on the IRS website here. Plus, you can confirm any outstanding amounts and explore options for repayment, such as:
- Direct Payment: You can pay any owed amount directly to the IRS.
- Installment Plan: If you prefer to spread out the payments, the IRS offers installment plans that allow you to pay your debt over time.
Beware of OIC Mills. These are companies that might reach out to you with promises of settling your tax debts for much less than what you owe.
Here’s how to handle them:
- Claims of Easy Settlements: OIC mills often claim they can easily settle tax debts. Be skeptical of promises to resolve debts for “pennies on the dollar.”
- High-Pressure Tactics: These companies may urge you to act quickly and use their services to settle your IRS debts.
- Check Eligibility Yourself: Before engaging with any service, use the IRS’s own pre-qualifier tool to see if you qualify for programs like the Offer in Compromise. This tool is available at the IRS’s official website and provides a reliable assessment of your options without the risks associated with third-party services.
Handling your tax obligations directly through official channels is the safest way to manage your IRS dealings and avoid potential scams.
Real-Life Examples of IRS Tax Scams: The Case of Elizabeth Carter, a Graphic Designer from Seattle
Overview
Elizabeth Carter, a graphic designer based in Seattle, Washington, encountered a sophisticated tax scam that promised a sizable tax refund. In March, she received an email titled, “Action Required: Claim Your Overdue Tax Refund.” The email looked professional, complete with what seemed to be legitimate IRS branding, and stated that Elizabeth was eligible for a refund of $1,250 due to a recalculated tax return.
Impact
Trusting the authenticity of the email, Elizabeth followed the link provided to submit her personal information in order to receive her refund. She entered details, including her Social Security number and banking information, on a form at the linked website. A few days later, Elizabeth noticed unauthorized transactions depleting her savings and new credit applications made in her name. This led to:
- Financial Loss: Immediate unauthorized withdrawals totaling over $3,000.
- Identity Theft: Several credit applications were filed under her name, drastically affecting her credit health.
- Emotional Distress: The stress of dealing with banks, credit agencies, and the police to resolve financial fraud and identity theft issues.
To avoid and prevent the situation Elizabeth Carter faced, let’s understand how to report it.
Reporting IRS Scams: A Step-by-Step Guide
If you encounter a potential IRS scam, it’s important to report it to the right authorities to help prevent further fraud. Here’s how you can report these scams effectively:
- Report to TIGTA: Contact the Treasury Inspector General for Tax Administration (TIGTA) if you suspect an IRS scam. You can file a report online or by phone at 1-800-366-4484.
- Email Forwarding: If you receive a suspicious email that looks like it’s from the IRS, forward it to phishing@irs.gov. Make sure not to open any attachments or click on any links in the email.
- Notify the FTC: Use the FTC Complaint Assistant on FTC.gov to report the scam. Remember to mention “IRS Telephone Scam” in your complaint notes.
- Social Security Scams: If the scam involves someone impersonating the Social Security Administration, use the reporting form available on the Social Security Administration’s official website.
- State Tax Authority Impersonation: If the scam seems to impersonate your state tax authority, get in touch with your state attorney general’s office to report the incident.
Taking these steps not only helps protect you but also assists in preventing these scammers from targeting others.
Strengthening Security Through Awareness and Action
Being aware of IRS tax scams is essential, not only to protect your money but also to safeguard your personal information from fraudulent use. A critical tip that bears mentioning is the importance of regularly updating your software and security systems on all devices. There are even tax relief group scam calls that cause more harm to your financial health. Taking preventive measures can prevent scammers from exploiting outdated security vulnerabilities to gain access to your information.
Swat Advisors possesses the expertise necessary to assist you in resolving any issues related to scams. Whether you’re facing complications from a scam or simply looking to prevent one, our team is equipped to provide the necessary guidance and support.
With the assistance of Swat Advisors, you can protect yourself from potential financial and identity theft pitfalls caused by tax scams. Additionally, we offer a range of additional services, including CFO services, serving as your tax planner in California (and beyond), providing advanced tax planning, life insurance planning, individual tax planning, business exit planning, business continuity planning, and operating a family tax office. These services are designed to optimize your financial strategy and secure your financial future in a comprehensive and tailored manner.
