Unfortunately, scams aren’t going away. In fact, they’re on the uptick, Anyone can fall prey to scams; even the savviest among us aren’t immune, as those who perpetrate them play to our fears and insecurities. This is especially true of tax scams. So what’s the best way to recognize a tax scam?
Below is a list and explanation of the most common tax scams, plus tips for keeping your money — and your personal information — safe. Should someone attempt to run one on you, report them to the authorities immediately.
The “IRS Agent” Phone Call
The phone rings. When you answer, a voice on the other end says something like: “This is Agent Smith with the IRS. You owe $1,000.” This blood-chilling greeting is followed by increasingly aggressive demands to wire the funds or face immediate arrest or deportation. Other times, they’ll demand your debit card information. Here’s the thing: Real IRS agents don’t call out of the blue and demand immediate payment — and they certainly do not threaten people over the phone.
What You Can Do: If you’re unlucky enough to receive one of these calls — and there’s a good chance you will at some point — ask for the caller’s name, title, and phone number, and report that information directly to the police.
Phishing scams use email to try to steal personal information. One common ploy is to send emails purportedly from the IRS claiming that you’re due a refund or owe money and that you need to send your Social Security number or other private information to resolve the issue.
What You Can Do: Never email private information. (One exception: Some accountants and other professionals may set up a secure email requiring a private pass code to reveal its contents.)
Crooks Pretending To Be You
A criminal who has your Social Security number can file a false return in your name and collect a fraudulent refund.
What You Can Do: Share your Social Security number only if absolutely necessary. If you think someone may have filed a tax return using your identity, call the IRS Identity Protection Specialized Unit at 800-908-4490. Also fill out Form 14039, the IRS Identity Theft Affidavit.
Crooks Pretending To Be a Real Charity
Be on the lookout for these vultures if you’ve recently lost a loved one to an illness mentioned in his or her obituary. You may get a call from someone claiming to represent a charity dedicated to curing cancer or ending heart disease.
What You Can Do: Check the IRS website to see if the organization is a qualified tax-exempt organization. If it’s not, keep your money in your pocket.
Crooks Pretending To Be Real Tax Preparers
These criminals manipulate your return to jack up the refund, then steal it. They may even try to charge fees for their so-called “services.”
What You Can Do: Ask those you trust to recommend tax preparers, or search the IRS’s Federal Tax Return Preparer directory. Before you hire anyone, ask for referrals and check them carefully.
Offers That Are Too Good To Be True
The Tax Shelter Promise
Some fraudsters tempt you with this lie: Invest your money with them, and you won’t pay taxes on the money — or the earnings.
What You Can Do: Don’t invest with a company you have never heard of, or in any product you don’t understand. If in doubt, get an independent opinion on any investments you’re considering.
Bad guys might appeal to your vanity, suggesting that you’ve got enough money to merit moving some of it offshore to protect it from the IRS. Fall for it, and you may never see that money again.
What You Can Do: Report potential scammers to the Federal Trade Commission. You can find them here.
A version of this article appeared in our partner magazine, The Essential Tax Guide: 2023 Edition.