The truth is that there are fraudsters everywhere. They may seem harmless at first, but they are already preying on your emotions. They’ll soon attempt to dupe you into handing over your personal information and money.
They may claim to be long-lost relatives or call about bogus issues with your internet connection, computer, or phone operating system. Some of the more popular scams include fraudsters posing as IRS agents and threatening jail if you do not cooperate with their requirements. Here’s how they operate—and how to avoid being their next victim.
- Every year, thousands of Americans fall victim to IRS scams, losing millions of dollars.
- IRS fraudsters use threats of jail, deportation, or other consequences to intimidate victims into submitting sensitive information or money.
- Scammers employ email, text messaging, postal mail, and other methods in addition to phone calls.
- Report any questionable calls or letters to the IRS if you believe you have been approached by a fraudster.
How IRS Tax Scams Work
Authorities claim that thousands of individuals each year, ranging from ordinary citizens to sophisticated professionals, fall victim to IRS and other impostor frauds, losing millions of dollars. According to an FTC survey, 17.16% of Americans reporting imposter fraud lost money to fraudsters, with a typical individual loss of roughly $1,000. Imposter frauds will cost Americans $2.3 billion in 2021, and that figure just includes incidents reported to authorities. Many victims do not make complaints because they are embarrassed.
Of course, imposter schemes aren’t the only means for thieves to obtain your personal information. Your information is kept in a variety of locations, including printed papers, computers, smartphones, the cloud, your workplace, doctor, financial service providers, your tax preparer, and the IRS. This data, particularly your tax returns, contains significant personal information such as your Social Security number (SSN), address, phone number, occupation, marital status, and income, all of which may be used to impersonate or frighten you.
While you can’t avoid all sorts of tax-related fraud, you can lessen your chances.
The IRS’s ‘Dirty Dozen’ Tax Scams
The IRS issues an annual list of what it refers to as the “dirty dozen”—some of the most frequent tax frauds that are presently in circulation. New frauds began in 2021 to take advantage of coronavirus tax breaks, and they lasted until 2022. The IRS warns people to be extremely wary of the 12 frauds listed below.
- Economic impact payment theft – Criminals have attempted to steal people’s stimulus payments by sending bogus text messages, phone calls, and emails, as well as stealing cheques from mailboxes. Furthermore, several nursing homes and care facilities attempted to steal CARES Act stimulus money from Medicaid patients.
- Unemployment fraud – Thieves have stolen taxpayers’ personal information and used it to claim state unemployment benefits. You may not discover you’ve been taken advantage of until the IRS issues you a Form 1099-G claiming that you got unemployment compensation that you need to record on your tax return—even though you never received such money.
- Phishing occurs when emails, websites, text messages, or social media seem to be from the IRS in order to attract consumers, companies, and tax professionals to give personal or financial information. Do not click on any links or download any attachments that may be contained with such a correspondence.
- Threatening phone calls – Criminals impersonating IRS officials threaten victims with jail, deportation, license revocation, or the cancellation of their Social Security number if they do not make an instant payment.
- Scammers imitate you in order to target your friends and family, or they impersonate your friends and family in order to target you.
- Ransomware – This malicious program infects the victim’s computer and then encrypts its data. The scammer wants money in order to regain access to restricted files. This scam often targets organizations and institutions, so it’s critical to be on the lookout for possible fraud both at work and at home.
- False charities – False charities may solicit you for money, gift card numbers, or personal financial information, frequently with names similar to legitimate charity.
- Fraud against the elderly and immigrants – Many of the scams featured here disproportionately target elderly persons and foreigners. Professional and personal ties that seem to be trustworthy may be an entrance point, particularly if no one appears to be watching out for the target. Threatening phone calls are a particular concern for those who speak little or no English and may have restricted access to information designed to warn them about such scams.
- Tax-debt-relief mills – These companies charge you money under the guise that they can secure you an offer in compromise with the IRS to settle your tax burden for pennies on the dollar.
- Tax preparers who are dishonest – A dishonest tax preparer may take your personal information. Also, keep an eye out for “ghost preparers.” They will persuade you to pay them for tax preparation by promising you too large returns. They will, however, refuse to sign your return and will not have a legitimate preparer tax identification number (PTIN).If you are detected, you might face fraud charges.
- Scams using unemployment benefits – Criminals cooperate with or against companies and financial organizations to get false payments from state and municipal governments.
- Agreements that are abusive – Unscrupulous marketers offer that by joining in sophisticated schemes, taxpayers may claim large tax deductions. They charge taxpayers to engage in these schemes and hold their customers liable for illicit tax underpayment. A solid rule of thumb is that if something sounds too good to be true, it almost certainly is.
Let’s take a closer look at how IRS fraudsters contact individuals.
Scammers conduct the bulk of their scams over the phone and are often confrontational. They attempt to persuade prospective victims that they are official IRS workers by spoofing caller ID, using phony or even real IRS employee badge numbers, and possessing vital information about their targets.
Scam callers may attempt to convince their victims to give them instant cash using a prepaid debit card or gift card, or by a wire transfer, which may be difficult to track. Even if you realize you’ve been duped, retrieving your money is very hard.
In February 2022, the FTC stated that more over a third of all reported fraud occurred through phone, and that although only 9% claimed a financial loss, that loss amounted for about $700 million, with a median loss of $1,200. The IRS reminded people that it normally contacts them by letter rather than phone.
Another important issue is email frauds. You may get an email that seems official because the fraudster has usurped the IRS emblem or the logo of a reputable tax software provider. Your refund, return status, or tax account may be mentioned in the communication.
Links in the email may take you to websites that seem to be authentic but are really run by criminals looking to steal your information and claim bogus tax refunds in your name. These websites may also include malware, which allows hackers to access your files or monitor your keystrokes without your awareness in order to steal your online logins and passwords. The IRS warns people that it will not approach them through email to collect personal or financial information.
Signs That You May Be a Victim
Aside from recognizing after the fact that you supplied your credit card number or other information to someone acting as an IRS representative, the IRS Taxpayer Guide to Identity Theft explains the following symptoms that you may have been the victim of tax-related identity theft.
- When you submit your tax return, it gets refused. This might occur if someone has previously filed a false return using your Social Security number in order to get a bogus refund.
- The IRS has sent you a letter. Whether you get a letter asking if you filed a tax return, it might mean that someone else tried to file using your information and the IRS is suspicious.
- You get a W-2 or 1099 from an employer for whom you did not work. Google the company’s name to determine whether it’s genuine. The name by which you are familiar with the firm may vary from its formal name on tax paperwork.
- You get a tax refund even if you didn’t file. While the IRS will give a refund if it discovers an overpayment mistake on your tax return (yes, really), you should first anticipate a letter of explanation.
- You get a tax transcript that you did not request in the mail. A tax transcript is a document that contains the majority of the line items from your initially filed tax return but does not include any modifications you make after filing the return.
- You are notified that an online account in your name has been established or that your current account has been deactivated without your knowledge. Your online account contains not only your personal information, but also your tax history for the last five years.
- You get an Employer Identification Number (EIN) without ever asking for one. Before presuming it’s a fraud-related EIN, be sure a family member, business partner, or known third-party applied for one on your behalf for business-related objectives.
- You are notified that you owe the IRS money or are sent to collections for a tax year for which you did not file a return. As soon as you get the notification, you should seek a Collection Due Process Hearing.
Anyone may now apply to the IRS for an identity protection PIN (IP PIN). An IP PIN may assist prevent you from fraudsters who file returns using your information.
What to Do if a Possible Scammer Contacts You
Here’s what you should do if you get any contact purporting to be from the IRS.
Any email claiming to be from the IRS is a forgery. Do not reply to the email, click on any links included within it, or download any files. Send the email to [email protected], then delete the original.
The IRS never sends text texts. It is a fraud if you get a text message claiming to be from the IRS. Do not respond to the message, view any attachments, or click on any links. Rather, send the SMS to the IRS at (202) 552-1226. Send a second message to the IRS with the number from which the phony text message came, then delete the bogus IRS text message.
Even if your caller ID displays a Washington, D.C. area code or reads “Internal Revenue Service,” do not believe that a phone caller claiming to be from the IRS is authentic. These particulars may be forged.
Give the caller no information. Say you can’t chat right now but will call back soon. Instead of a phone number, request the caller’s name and badge number. Hang up and immediately notify the Treasury Inspector General for Tax Administration. Also, send an email to [email protected] with the subject “IRS Phone Scam.”
The IRS will never threaten you with arrest or order the local police to arrest you. There have been situations when federal police have arrested individuals for tax evasion, but these arrests do not happen out of nowhere. Ordinary folks who have just made a mistake on their tax forms face no prison time for unpaid taxes.
Even though the IRS communicates through mail, a letter that seems to be from the IRS may be fraudulent. Scammers may send bogus IRS letters by mail, and they can be difficult to verify.
If the letter requests money, be wary. A letter requesting that you write a check to the IRS is a fraud; genuine payments to the IRS must be made payable to “United States Treasury.”
Even if you disagree with the amount of the notification, scammers will encourage you to transfer cash immediately and challenge it later. The actual IRS permits taxpayers to challenge allegations first and then pay after an agreement has been reached.
Rather of presuming that an IRS letter asking money or personal information is genuine or fraudulent, go to IRS.gov and look for the appropriate notification or form number. Also, go to the IRS’s “Understanding Your IRS Notice or Letter” website. You may also contact the IRS directly to enquire about the authenticity of a letter. Find the relevant phone number in the IRS.gov support area.
How Does the IRS Communicate With Taxpayers?
Generally, the IRS will contact you through letter first. It does not make random phone calls, and it does not engage with taxpayers by email or text messaging.
What if I’m Threatened if I Don’t Immediately Pay?
The IRS never demands money in advance. All taxpayers have the right to contest the IRS’s judgments before paying, with financial settlement taking place only if an agreement is reached between the IRS and the taxpayer. It’s a fraud if you’re asked for rapid payment or else.
What Is Phishing?
Phishing is an effort to get personal and financial information from another person through email, SMS, websites, or social media. Scammers may access your information and install dangerous software on your computer or phone through links in emails, messages, and social media postings that seem genuine but aren’t. In whatever type of digital communication, never click on unsolicited links. Also, never download an attachment from an unknown source. Once you’ve done either, it’s usually too late.
The Bottom Line
Because there are so many methods for thieves to get your personal information without your knowledge—from hacking and phishing to social engineering—anyone may become a victim of an IRS-related scam. Your chances of being a victim will decrease if you are aware of the scams and how they operate. Never give out personal information in response to an unwanted phone contact or email.
New frauds occur all the time, so trust your instincts if something seems strange. If you are worried about your taxes, never interact with anybody who contacts you and always contact the IRS immediately using the information on the official IRS website, IRS.gov. The IRS and other government organizations depend on you to alert them to these frauds. If you file a report now, you may be able to assist someone else later.
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