As the tax filing deadline has passed, taxpayers can put one stressor behind them. However, scammers and fraudsters continue to threaten individuals and organizations year-round. It is crucial that filers understand common tax scams and what precautions to take to ensure you and your finances stay safe.

Phone Scams

Scammers impersonating IRS agents can terrorize individuals, demanding urgent payments for tax debts or penalties and threatening legal action or arrest if demands are not met. Scammers can acquire convincing details such as names and addresses to make the fraud appear legitimate.

However, once payments are made, these scammers vanish, leaving individuals out of pocket. Worse, disclosing personal details, such as Social Security numbers or bank account details, can lead to identity theft and more significant financial damage by scammers opening new accounts or applying for loans in the victim's name.

The Red Flags

• IRS agents will never demand immediate payment or threaten legal action over the phone. Instead, they will send a letter if there is an issue with your tax return.
• The IRS will never ask for payment using a prepaid debit card or wire transfer.
• Scammers often request payment in unusual ways, such as through iTunes or gift cards.
• The caller may use aggressive or threatening language to get you to comply.
• The caller may ask for your Social Security number or bank account details over the phone.

How To Avoid

To protect yourself from phone scams posing as IRS agents, it's crucial to be cautious when receiving calls demanding immediate payment for tax debts or penalties. Scammers can use threatening tactics by claiming legal action or arrest if compliance is not met. Even if you are met with these threats, you must never provide personal information or make payments via the phone. If you get a call asking for this, stay alert and check the caller's legitimacy, hang up, and call the IRS directly to verify the details.

Phishing Scams

Phishing is a type of cybercrime that involves tricking people into giving up sensitive information such as usernames, passwords, and credit card details by posing as a trustworthy entity. The consequences of falling victim to a phishing scam can be quite severe. Personal information can be used for identity theft or financial fraud, leading to loss of money and damage to credit scores.

The Red Flags

• A phishing email's sender may use a fake domain name that closely resembles a legitimate domain name.
• Keep an eye out for phrases that don't sound natural or text that looks slightly off.
• Phishing scams often create a sense of urgency to prompt the reader to act quickly before thinking.

How to Avoid

To avoid phishing scams, be cautious when clicking links or downloading attachments from unknown senders. Always hover over the link to see the URL it's directed to before clicking on it. Also, update your computer's security software regularly, as hackers are constantly updating their methods. Finally, use unique and strong passwords for all online accounts. Make passwords of varying lengths that include upper and lowercase letters, numbers, and symbols.

Verification Requests

Verification requests scams involve tricking individuals into submitting personal information by asking to verify confidential data such as W-2 forms or by uploading pictures of sensitive documents. Providing these scammers with your personal information can have long-lasting consequences, including identity theft and financial loss.

The Red Flags

• Unlike honest IRS communication, scammers may contact taxpayers via email, text, or social media to request personal or financial information.
• Scammers often use fear tactics to coerce individuals into providing personal data immediately.
• They may pressure you into paying with gift cards or by wiring money.

How To Avoid

The Internal Revenue Service (IRS) only verifies information when they have a suspicion of a genuine taxpayer's name or Social Security number. The IRS would send a letter 507IC with a reference number on the top corner and ask for a verification request using the correct Identity Verification Service online. You must be able to verify that letter on the official IRS website to give any information or documents to people calling or emailing you.

Tax Season Identity Theft

Identity thieves may file tax returns using stolen Social Security numbers. They often target vulnerable populations, including the elderly and young, leaving their victims serious consequences, including delayed tax refunds, damaged credit, and even putting necessary medical treatment at risk.

The Red Flags

• Unsolicited emails or text messages claiming to be from the IRS or other tax agencies.
• Unexpected tax bills or refunds are showing up in your mailbox.
• Notices from tax professionals that multiple returns have been filed with your social security number.

How To Avoid

Protecting your identity during tax season starts with taking precautions to keep your personal information safe. Make sure to create strong passwords and update them frequently. Avoid providing sensitive information on unsecured websites or over the phone. More importantly, always check your credit report for suspicious activities.

Inflated Tax Refund Claims

Many taxpayers are looking for ways to maximize their refund. However, scammers may take advantage of this desire by making inflated refund claims with the promise of a more significant return in exchange for a fee. Inflated refund claims can severely affect the victim, including losing benefits from Social Security and low-income housing.

The Red Flags

• Scammers make inflated claims on your tax return in exchange for a fee.
• They may provide you with fake IRS documents to support your claims.
• Scammers will deny receipt of your refund to avoid paying out the agreed-upon amount.

How To Avoid

Protecting yourself from tax refund scams starts with being vigilant and verifying the legitimacy of any claims made by tax preparers or refund service providers. Always check the credentials of those who prepare your tax return. Avoid providing sensitive information, such as social security numbers, to anyone you cannot verify. Finally, make it a rule never to provide payment upfront, especially to those who make exaggerated claims.

Fake Charities

Fake charity scams are particularly prominent during the tax season, as scammers attempt to exploit individuals looking to donate following a disaster. These organizations often have names that sound similar to legitimate charities. These scammers may even impersonate the IRS, claiming they require personal financial information or Social Security numbers. These scams can lead to tax evasion and tax fraud, which can seriously impact both donors and governments.

The Red Flags

• The charity is not registered or able to provide proof of registration.
• The charity uses high-pressure tactics to persuade you to donate.

How To Avoid

It's important to stay vigilant and recognize the red flags of these scams. To ensure your donation goes to a trusted organization, look up legitimate charities through the IRS. Do not give out personal information or send cash, as this could result in identity theft, financial loss, and other serious consequences. Staying informed about potential scams can help protect you from becoming a victim of fraudulent activity during tax season.

Bottom Line

Tax scams can come in a variety of forms. By taking the time to understand what tactics scammers may use, you can be better prepared to protect yourself from potential financial loss or identity theft. Following these tips can help ensure you aren't taken advantage of and keep your hard-earned money safe.