Tax season is underway (Jan 24 to April 18) and the IRS has warned of a probable increase in scams targeting taxpayers. The filing season is a prime time for cybercriminals to impersonate the IRS and delude taxpayers into believing that they owe the IRS money, they’re due a refund,  or the IRS needs their personal or financial information. This can happen via phone calls, texts, emails, social media, or any other online service. 

According to the annual IRS-CI report, over 2,500 criminal investigations were made in connection with financial schemes such as tax fraud in 2021. The total amount identified from tax fraud and other financial crimes added up to more than $10 billion. 

Cybercriminals are getting smarter each year with their tactics. Keep reading to learn the most common scams they practice, and how to keep yourself safe.

The most common tax scams taxpayers should know

Prevention is better than cure, and as a taxpayer, you need to educate yourself about tax scams to prevent yourself from falling victim. Here are some of the most common tax scams.

Phishing

Phishing, meaning ‘fishing for information, ‘ is a scam where cybercriminals try to trick you into sharing your personal and financial information. This information can then be used to either steal your identity or file false tax returns. 

Fraudsters use texts or emails to impersonate officials from the IRS or others in the tax industry asking, demanding, or scaring you into revealing your sensitive information. 

They may seek information regarding you tax refunds, filing status, personal information, ordering transcripts, social security number, and PIN information.

What to do: The IRS does not contact taxpayers via emails, texts, or any social media outlets for your personal or financial information. Do not engage or click on any links from these types of messages.

Forward the email to phishing@irs.gov  and proceed to delete the email. If you did click on the links, visit the identity protection page

Phone call scams

Impersonating IRS or tax officials on the phone, scammers demand taxpayers pay tax bills within a short frame of time. They threaten them with penalties, deportation, or even  imprisonment.

These scam calls sometimes show up as “IRS” on their caller ID, making taxpayers believe the call is legitimate. Fraudsters have also been known to spoof the telephone number of the IRS Taxpayer Advocate Service Office in the past. 

What to do: Because the IRS does not initiate any contact through the phone, calls claiming to be from the IRS are fake and should be blocked. Incidents like these should be reported the to Treasury Inspector General for Tax Administration (TIGTA) via their online complaint form

Deceitful tax preparers

Amongst many sincere and loyal tax professionals,there exist some that could potentially scam you. These fraud officials may try to file a tax return on behalf of another person. Any errors that they make in the process become a liability of the taxpayer. 

Some fraudulent tax preparers charge taxpayers for filing their returns. These are the taxpayers who in reality don’t have to file any tax returns. Moreover, they make money off of illegal refunds. 

What to do: One thing to notice is these tax preparers never sign the tax returns they prepare in order to protect their identity. In order to protect themselves, taxpayers must request these tax preparers to sign the returns with their Prepare Tax Identification Number (PTIN). 

They could also ask the tax preparers for their professional credentials, qualifications or history. 

Ransomware 

Ransomware is malicious software/malware that encrypts your data and blocks your access to your devices. This cyberattack mainly begins with malicious emails or texts you receive on an online platform. 

When the victim opens an attachment or clicks on the given link in the email or text, the ransomware is installed on the victim’s device and gains control. This malware gains access to all of the data stored on your device, data on your cloud storage, emails, credentials stored in your browser, and its history. Additionally, it may also track your keystrokes and other device activities. 

By possessing all of their victims’ data, cybercriminals commit identity theft, make new accounts using the victim’s information, or file a tax return claiming a fraudulent refund.

What to do: TheIRS doesn’t often communicate via emails or text. Any emails claiming to be from the IRS or any other known tax institution might look legitimate, but are often fake. Do not engage or click on any links or attachments. Forward the email/text to phishing@irs.gov  and delete it. 

Offer in Compromise (OIC)

OIC (Offer in Compromise) is a program established by the IRS for taxpayers who can not afford to pay their tax bills. This program allows them to settle their tax debt for a reduced amount. But taxpayers need to meet very specific criteria under law in order to be eligible for this program. 

Some deceitful tax debt resolution companies delude desperate, unqualified taxpayers into believing that they can settle their tax bills at “pennies on the dollar.” In return, these companies demand a hefty fee. 

What to do: TheIRS offers a free, online Offer in Compromise Pre-Qualifier tool. Taxpayers can use it to assess and confirm their eligibility. They are also provided an estimated amount if they qualify. 

Additionally, the IRS has created a video playlist that walks you through the entire application process. According to the IRS, tax payers must apply for OIC without the help of an unscrupulous third party.

Social media scams

Social media scams have also led to tax-related identity theft. It’s common for scammers to impersonate family or friends on social media. With the help of their fake social media accounts, they reach out to their victims, persuading them to click on links that initiate a malware attack. 

This gives them control over the victims device and they are able to access all of the victims sensitive data stored on the device. This data is the used to steal identities and file false tax returns. 

This scam works because people tend to trust their family and friends. 

What to do: Crosscheck with the friend/family to ensure if they have infact made another account. 

Fraud against seniors

Family of senior citizens should be particularly mindful of tax scams. As older citizens tend to have a large amount of retirement savings, they are a popular target for fraudsters.

Senior citizens Often report receiving aggressive and threatening phone calls by criminals impersonating IRS agents. The use a very convincing tone, fake IRS identification badge numbers, and alter the caller ID to make seem like its the IRS calling. 

Victims are told they have a refund due or that they owe the IRS money that must be paid immediately, often through preloaded debit cards or a wire transfer. 

If the criminals are refused, they become hostlie and insulting, often threatening senior citizens.

What to do: Generally, the IRS will mail a tax bill to taxpayers that owe money. They do not demand payment by a specific method as a debit card, gift card, or wire transfer. The IRS will never threaten to involve the local police.

If You receive a call like this, do not give out any information and hang up immediately.  Furthermore, victims should report the call to the Treasury Inspector General for Tax Administration by using their IRS Impersonation Scam Reporting web page.

Scams against non-English speakers

Non-native English speakers are another vulnerable group of citizens that may fall victim to tax and identity fraud. In a phone call, a fake IRS official may incite fear and threaten to share their personal or financial data or demand them to pay their tax bills. 

There is a high chance of immigrants falling for such acts and giving away their information, Social Security Number, and much more over fear of deportation or imprisonment, or because of a lack of understanding due to a language barrier.

What to do: Non- english speakers should know that the IRS does not contact taxpayers through text, emails, or phone calls. Any calls claiming to be from the IRS and demanding payment are most likely scams. 

On receiving such calls, victims can verify them by visiting the IRS’ How to know it’s really the IRS calling or knocking on your door page. Victims are also instructed to record the number and then hang up the phone immediately. Report the call to TIGTA (Treasury Inspector General for Tax Administration) using their IRS Impersonation Scam Reporting form.

HR office scams

In order to get their hands on w-2s and other tax information, scammers may hack into emails or make up an email ID that looks very similar to a real email account of the company. They then proceed to ask colleagues for money-related favors using the fake email account. 

Scammers may divert payments of multiple employees into their account or ask for a payment upfront making a more believable IRS invoice or document. 

What to do: Employees must be educated about BEC (Business Email Compromise)/BES (Business Email Spoofing) scams and asked to never make any gift card purchases or reroute their deposit to a different account. Victims should cross-check with the employee over the phone or in person.

Any BEC/BES variations should be forwarded to the Federal Bureau of Investigation Internet Crime Complaint Center (IC3) where a complaint can be filed. 

Protecting yourself from common tax scams

Phishing, phone scams, email scams, ransomware, and tax identity theft frauds are some the most commonly practiced tax scams. Usually, these scams involve tricking taxpayers into sharing their financial information and stealing their identity to file false tax returns in their names. 

It’s in the best interest of taxpayers to stay up-to-date on the modern, most common tax scams, and to check in with the IRS tax scam alerts each tax season. Acquiring an IP PIN issued by the IRS is also beneficial for taxpayers, as it provides extra account security. Tax scams should also be reported to IRS to aid investigators in stopping cybercriminals.

Another preventive measure taxpayers should consider is installing security software that protects your devices and accounts from being compromised and provides digital security at all times. 

Lifelock Identity Theft Protection is one such example of a security software that not only secures your devices and sensitive data but also monitors your personal and financial accounts online for any identity misuse or thefts.