How to Avoid IRS Scams This Tax Season
Reading time: 6 Minutes
March 12th, 2021
Each year, thousands of Americans lose hard-earned money and their personal information to tax scams. Especially during tax season, fraudsters use email, regular mail or the telephone to pose as the IRS, as tax professionals and even as you, the tax-payer.
The last thing you want to deal with is identity theft or having to undo financial damage as a result of a tax scam. As you prepare to file this year's taxes, here's a breakdown of a few of the most common types of scams to watch out for, how to avoid them and what to do if you think you've been the victim of a scam.
Some scammers will pretend to be the IRS, and pressure you to send them money, often for supposed "back taxes" or fines. They do this two main ways:
Phishing is a type of scam where criminals attempt to gain sensitive data, such as your personal or financial information, by posing as a legitimate organization, via electronic means, including emails, website ads or text messages. Usually, these attempts will include a link to an official-looking website for you to provide bank account numbers and online login credentials—but these sites are actually clever fakes and any info you provide will go straight to scammers. Alternatively, you may receive a tax "bill" with information on where to send a check or wire funds.
Vishing is a similar type of scam, only instead of online, contact is made through phone calls and voice communication. Crooks will call, posing as representatives from a trusted organization, and attempt to receive sensitive info over the phone. Both phishing and vishing scams will often try and intimidate victims with threats of financial repercussions or legal action in order to secure payment from victims in the form of wire payments or other non-refundable cash transfer.
In reality, the IRS will never reach out to you via email, text messages or through social media to ask for personal information. The IRS will not demand immediate payment for taxes, threaten to involve law enforcement agencies or immigration officers, or specify that you use payment methods such as gift cards, prepaid debit cards, or wire transfers.
Instead, official communications from the IRS begin with a letter in the mail that you can appeal or ask questions about. If you do, in fact, owe federal taxes, the IRS will request payment but will provide a range of options and will direct all payments only to the U.S. Treasury.
In the event of a legitimate audit or investigation, IRS employees may make an unannounced, in-person visit, but they will always provide official credentials in the form of a pocket commission and a HSPD-12 identification card.
Other scammers will pretend to be you, so they can collect a refund from the IRS under your name.
In this type of scam, criminals snag your personal information—specifically, your name, birth date and Social Security number—and then use made-up financial info to electronically file a fraudulent income tax return under your identity.
According to the IRS, most refunds are issued within six to eight weeks from the date they receive your return. However, it can take several months longer for the IRS to verify tax-related paperwork issued by employers. By the time an ID theft is discovered, a scammer may have already received "your" refund in the form of a Treasury check (frequently mailed to a vacant home) or preloaded onto a debit card, from which funds can be withdrawn from an ATM.
Although the IRS will eventually send taxpayers the correct refund they are owed, victims of false return scams are left with the hassle of having to prove their identity to fix their tax returns and receive the money they are owed. In some situations, older taxpayers receiving disability benefits may see their benefits cut off if the Social Security Administration uses a fraudulent return as evidence that the individual is working.
To reduce your risk of crooks filing a false income tax return on your behalf, file your taxes early. This lowers the chance that someone else can get ahead of you and file a fake return. Also, do everything you can to minimize your risk of identity theft. We've got a few tips for protecting your sensitive personal information.
Some fraudsters may pose as tax professionals and offer to prepare your tax returns for a fee, but won't stick around to be responsible when it turns out they claimed all kinds of invalid deductions on your return.
These so-called “ghost preparers" will refuse to sign tax returns as the paid preparer, either on paper or digitally, to evade detection by the IRS. Instead, they'll ask you to write “self-prepared" on your return, then sign and mail it to the IRS yourself.
Some unscrupulous tax preparers may only set up shop during tax season, accept money to prepare a number of fraudulent returns, then vanish without a trace after the tax deadline. Other ghost preparers may claim to simply have “forgotten" to sign a client's tax return and will promise to sign it “later" after the preparer gets paid.
In extreme cases, ghost preparers may invent income to qualify individuals for certain tax credits or claim fake deductions to increase the size of a tax refund—then direct refunds into the ghost preparer's own bank account instead of the client's account.
Keep in mind that all paid federal income tax return preparers are required to be registered with the government and have a unique Preparer Tax Identification Number (PTIN). If you're paying someone to do your taxes, make sure their signature is on the return as the preparer before it's submitted to the IRS.
The IRS advises taxpayers to learn about tax preparer credentials and qualifications on its Choosing a Tax Professional page at IRS.gov. The IRS also offers an online directory of certified federal tax return preparers.
What to Do if a Scam Happens to You
If you believe you have been a victim of a tax return scam, visit the IRS's Taxpayer's Guide to Identity Theft for more information and to learn about steps you can take. If you believe a fraudulent tax return has been filed in your name, you can request a copy of the return. If a tax return you filed online has been rejected because of a duplicate filing under your Social Security number, fill out and submit IRS Form 14039, Identity Theft Affidavit.
Warning signs of identity theft include:
- being unable to e-file your tax return because of a duplicate Social Security number
- IRS records indicating that you received wages or other income from an employer you didn't work for
- receiving IRS letters or notices about tax transcripts you did not request, tax returns you did not file, a new IRS online account in your name that you did not create, among other suspicious signs
If you've encountered any of these situations, contact the IRS immediately.
To learn more about ways to stay safe while banking, visit Bank of Hawaii's Security Center.
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