Tax criminals will take advantage of any opportunity they can find to scam you out of your hard-earned money. While most people dread the tax season, fraudsters thrive on it. It’s the perfect time for them to trick law-abiding taxpayers into handing over their sensitive information.
Though their typical modus operandi is to scare you into giving them money by impersonating government officials, they may also use this opportunity to deliver malicious software to your electronic devices in order to obtain your personal credentials.
In this post, we’ll focus on explaining exactly how tax scams work so that you’ll know how to avoid these attacks.
Different Types of Tax Scams
Tax scams have become such a big problem that ever since 2004, the IRS publishes an annual list called the Dirty Dozen.
This list contains short explanations of a wide selection of schemes that could pose a risk to taxpayers. Though many of them are more commonly encountered during tax-filing season, the IRS warns taxpayers to be vigilant throughout the year.
Below are some of the most common tax scams that have earned a spot on the IRS’ latest list:
Fraudulent phone calls
A popular method used by scammers to con taxpayers is the phone scam.
The bogus caller will pretend to be an IRS agent and make it seem legitimate by using the following tactics:
- altering their caller ID
- using IRS official titles
- using counterfeit badge numbers
They then claim that the victim has an outstanding tax bill and usually demand payment through wired transfers or prepaid debit cards.
They may even tell you that a warrant has been issued for your arrest or threaten to have you deported.
Cybercriminals often attempt to steal taxpayers’ personal information through phishing attempts such as fake emails, website landing pages, text messages, and social media approaches. These communications may seem legitimate and will usually claim to be from the IRS.
Not only do scammers target taxpayers themselves, they also use more advanced schemes known as business email compromise (BEC) or business email spoofing (BES) to attack human resources personnel, schools, payroll administrators, and tax professionals.
Below are a few examples of what these cybercriminals may pose as:
- an organization, such as the IRS, asking you to pay an invoice that’s not real
- a staff member asking to re-route a direct deposit
- someone you recognize and trust, like an executive, asking you to wire a transfer
- a government official asking for your personal details in order to receive a tax refund
Though tax-related identity theft has become less common over the past few years, the IRS still takes it very seriously.
This type of scam occurs when fraudsters claim a tax refund by filing a counterfeit return using your Social Security Number or Individual Taxpayer Identification Number (ITIN).
Dishonest Tax “Professionals”
Many taxpayers use the services of paid professionals to prepare their returns. However, if you don’t choose wisely, you could end up being scammed by dishonest preparers.
By claiming to be legitimate tax preparers, these criminals can use your personal information to steal your identity and claim fraudulent refunds from the IRS.
Refunds You’ll Never See
This method involves scam artists that trick others into committing fraud by claiming fake rebates, benefits, or tax credits.
They attract victims such as non-English speakers, older citizens, low-income taxpayers, and individuals who aren’t required to file a tax return. They use various deceptive methods, such as:
- the distribution of flyers or advertisements
- fraudulent storefronts
- presentations through churches or other community groups
They usually pose as tax professionals and promise to help you claim a ridiculous amount from the IRS. Most of the time, they submit a claim on your behalf and arrange for it to be paid out to themselves, without you even knowing about it.
How to Avoid and Report Tax Scams
By being aware of the various ways in which criminals can scam you, especially during tax season, you’ll know what signs to look out for.
The IRS will never approach you through social media, text message, or email to request sensitive information such as PIN numbers, passwords, or similar data that can be used to access your financial accounts.
Before you respond, click a link or convey any information that you’re uncomfortable sharing over the phone or via email, you should always verify whether it is, in fact, the IRS that is contacting you.
Be mindful that the IRS generally initiates contact through the postal service. In rare circumstances, they may come to your home or business—usually if you owe a sizable tax debt. This visit will usually be preceded by several letters, and the agent will present you with two forms of ID.
If you suspect a scam, you can report it here or call 800-366-4484.
It’s always frustrating to get caught in a scam when you’re trying to fulfill your tax duties. Unfortunately, criminals are always evolving and inventing new ways to trick you out of your money. You can stay out of harm’s way by being vigilant—especially during tax season.
Remember that if you have tax debt to resolve, you may feel more vulnerable to these scams because you are nervous that you are on the IRS’ radar.
If you need help with tax resolution, you don’t have to carry the burden alone. The experienced tax relief lawyers at The Tax Defenders can review your case thoroughly and provide you with the best options for achieving tax relief in the most financially beneficial way possible.