Every year, the Internal Revenue Service (IRS) issues warnings to taxpayers to be on the lookout for new and more convincing tax scams.
In 2019 alone, the IRS identified $1.8 billion of total tax fraud, which includes some of the most prevalent scams targeting individual taxpayers, such as phone scams, phishing, and refund fraud.
Scams continue to get more advanced and creative, so it pays to know what to look out for.
Here are common tax and IRS impersonation scams, how you can avoid them, and what to do if you think you’re a victim.
According to the Treasury Inspector General for Tax Administration, 14,700 taxpayers were victims of telephone scams between 2013 and 2019, resulting in a loss of $72 million.
If someone calls you and identifies themselves as an IRS representative, it’s smart to take it seriously. But before taking any action, consider the possibility of a scam.
If you owe money to the IRS or they need to contact you for any other reason, you will receive a letter via the U.S. Postal Service before they call you. If you’re unsure if you received a notice, keep these common scams in mind:
- IRS impersonation phone scams: These are fake calls from the Taxpayer Advocate Service claiming to be the IRS. Sometimes, they’ll demand immediate payment of taxes by prepaid debit card or wire transfer or tell you that you’re entitled to a large refund as long as you provide personal information. Don’t do it.
- Phone calls that threaten to suspend your social security number: Scammers might also mention an unpaid tax bill and threaten to suspend your social security number. You should never give out private information, like bank account numbers or a social security number, over the phone. If you receive one of these calls, hang up immediately.
Remember that the IRS will never demand payments via wire transfer, debit card, or gift card; call about an unexpected refund; ask you to make a payment to a person or organization other than the U.S. Treasury; or threaten to immediately contact the police.
Digital communication scams
Phishing is when hackers use digital communications, such as emails, social media, text messages, and websites, to attempt to trick you into paying them or steal your information.
While some phishing scammers may impersonate the IRS, they can also pose as a company, store, or even a friend. These digital scams often include a link requesting personal data, such as your social security number.
Be on the lookout for these common phishing scams:
- IRS impersonation email scams: The subject lines of these emails vary, but typically resemble, “Automatic Income Tax Reminder,” “Electronic Tax Return Reminder,” or something similar. The spoofed emails will contain details about a refund, electronic return, or tax account and link to a website resembling the IRS website, IRS.gov. They may also contain a “temporary password” or “one-time password” that will supposedly allow you access to the files to get your refund.
- “Tax Transcript” email scams: These email scams usually have a subject line such as “Tax Account Transcript” or “Tax Transcript.” But be aware, these faked communications have link or file attachments that contain malware, designed to infect devices or steal data.
If you see emails with suspicious headers and links, avoid, delete, and report them. Keep in mind that the IRS will never send unsolicited emails, email sensitive documents like tax transcripts, or contact anyone via social media or text message.
Tax refund scams
After stealing data from tax professionals and filing fraudulent tax returns, scammers deposit money into your bank account. Shortly after, they’ll call to notify you of the mistake and demand the money be returned.
Here’s what to look out for:
- Some scammers may pose as debt collection agency officials and contact you to report a refund deposit error, and then request the money be returned to a “collection agency.”
- Other times, scammers automate calls from the “IRS” with a false case number threatening you with criminal fraud charges, “blacklisting,” and an arrest warrant. This call will typically end with a phone number to call to return the tax refund.
Keep in mind that if for any reason you must return funds to the IRS, the above is never how it’s done. The IRS has specific procedures to do so.
How to tell if an IRS communication is real
It’s important to understand there are times the IRS may actually have to contact you.
In these instances, you will usually receive several letters (called “notices”) from the IRS in the mail first.
Here’s how to confirm other communications are legitimate:
- If you’re being audited, it is possible a member of the IRS may call you to discuss terms, but only after contacting you by mail. The IRS will also not demand you make an immediate payment to anyone other than the U.S. Treasury or request payment via prepaid debit card, gift card, or wire transfer.
- If someone from the IRS must come to your home, then they will always present you with two forms of official credentials: A pocket commission and a HSPD-12 card.
When to suspect that IRS communications are fraudulent:
- Any contact that includes threats to call the police, immigration officers, or other law enforcement agencies to have you arrested for not paying.
- Any contact that threatens to revoke your social security number, driver’s license, or immigration status.
Both are examples of ways scammers attempt to frighten you into buying into their schemes.
How to protect yourself against tax fraud
Here are best practices to help you minimize the possibility of becoming a victim of tax scams:
- Do not give your social security number out unless there’s a good reason to do so, and you know exactly who you’re giving it to.
- Avoid handling private financial matters over public wifi — this includes any free wifi in coffeehouses, hotels, or airports, where wifi is open or where wifi access passwords are shared. Always use a secure internet connection, especially if you’re filing your taxes electronically.
- Before handing over personal financial information to a tax preparer or IRS agent, make sure you research them or verify their credentials.
- Check your credit report at least once per year to confirm there is no suspicion or unfamiliar activity.
If you believe you may be a victim of tax or IRS impersonation scams, you should report it to the Treasury Inspector General for Tax Administration at its IRS Impersonation Scam Reporting site or send an email to email@example.com.