Tax Scams and How to Avoid Them: Protect Yourself from IRS Fraud

Written by Top Dog Tax Relief          
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Overview

Over the past few years, tax scams and identity theft attempts have risen significantly, according to a recent AP report. Eva Velasquez, CEO of the Identity Theft Resource Center, points to the “sheer volume and growing sophistication” of these scams as a sign that fraudsters are increasingly leveraging AI to trick individuals into sharing sensitive information. The IRS has also taken notice, adding AI-driven impersonation schemes to its annual “Dirty Dozen” list of tax scams. Whether it’s during tax season or any time of year, taxpayers must remain vigilant and stay alert to attempts to steal their money, personally identifiable information, and financial data.

Key Takeaways

  • Tax scams are becoming more advanced and harder to detect: Fraudsters are increasingly using AI and sophisticated tactics to impersonate the IRS and steal sensitive information.

  • Knowing the warning signs can protect you: The IRS will never contact you via text, email, or social media or demand immediate payment through unusual methods like gift cards or crypto.

  • Quick action can minimize the damage: Reporting suspicious activity and taking immediate steps—like filing an identity theft affidavit or monitoring your accounts—can help protect your finances and identity.

What Are Tax Scams?

Tax scams involve bad actors (criminals) trying to steal your money or your personal information by impersonating the IRS. They often use scare tactics and a sense of urgency to trick you into giving them your credit card information, Social Security number (SSN), or other confidential data.

Common Types of Tax Scams

There are several types of tax scams that make the rounds annually. Some of the most prevalent include:

  • IRS Impersonation. Scammers pretend to be the IRS, claiming you owe back taxes. They often make payment demands or threaten you with arrest, revocation of your license, or other legal action.
  • Phishing/Smishing. AI-generated fake emails and text messages (SMS) are rapidly increasing in frequency and number. Many suggest you have an unclaimed tax refund or an impending IRS investigation.
  • Fake Tax Preparers. Also known as “ghost” tax preparers, these people will prepare your returns but refuse to sign them. In some cases, their fees are also tied to the size of your refund, which is fraudulently inflated.
  • Identity Theft. Scammers may also file tax returns under your name. This can make filing frustrating and even delay your refund.

Tax Scam Warning Signs

You can avoid becoming a victim of a tax scam if you know what to watch for and how the IRS communicates with taxpayers.

Tax Scam Red Flags

The IRS never initiates contact via text, email, or social media. They also won’t:

  • Request immediate payment via gift cards, crypto, or wire transfers
  • Threaten you with jail or deportation
  • Request sensitive information over the phone or by text
  • Make unsolicited refund promises

How to Protect Yourself From Tax Scams

The best way to protect yourself from scammers is to stay vigilant and follow these steps:

  1. Verify all IRS communications – Contact your local IRS office, call 800-829-1040, or log in to your IRS online account.
  2. Use trusted tax professionals – Check the Better Business Bureau, your State Attorney General’s office, and the IRS Office of Professional Responsibility (OPR) for any complaints or issues.
  3. Protect your personal information – Use complex passwords and change them frequently. Enable two-factor authentication on email and financial accounts. Always password-protect your home router and use a VPN whenever possible.
  4. Enable identity protection PIN (IP PIN) – Apply for an identity protection PIN (IP PIN) with the IRS to prevent someone from filing a return using your SSN.
  5. Avoid clicking suspicious links or downloading attachments – Never click on links in emails or text messages unless you are 100% confident of the source. The same goes for any attachments. This is the most common way for scammers to infect your computer or phone and gain access to your personal data.

You should also limit the personal information you share publicly on social media.

Tax Scam Victim? Follow These Steps

If you’re contacted by someone you suspect is a scammer, acting quickly can help protect your personal information and limit potential damage.

Steps to Take Immediately

  • Do not engage or share information: Avoid responding to suspicious calls, emails, or messages. Do not provide your SSN, bank details, or any other sensitive information.
  • Do not click links or download attachments: These may contain malware or lead to fraudulent websites designed to steal your data.
  • Report the scam to the IRS: Forward phishing emails or suspicious messages to phishing@irs.gov so the IRS can investigate and warn others.
  • File a report with the Federal Trade Commission (FTC): Visit IdentityTheft.gov to report the incident and receive a personalized recovery plan

If You’re a Victim of Identity Theft

If you believe your identity has already been compromised, take these additional steps right away:

  • File IRS Form 14039 (Identity Theft Affidavit): This alerts the IRS that your identity has been stolen and helps protect your tax account.
  • Monitor your credit reports: Check your credit regularly for unfamiliar accounts or activity. You may also consider placing a fraud alert or credit freeze.
  • Review financial accounts closely: Watch for unauthorized transactions and report them to your bank or credit card provider immediately.
  • Respond promptly to IRS notices: If the IRS contacts you about suspicious activity, follow their instructions carefully to resolve the issue as quickly as possible.

Taking swift action can significantly reduce the impact of a tax scam or identity theft.

Final Thoughts

Tax scams are constantly evolving, but staying informed is your first line of defense. By understanding how these schemes work, recognizing the red flags, and taking proactive steps to protect your personal information, you can significantly reduce your risk. If you’re ever unsure about a suspicious communication or if you believe you’ve been targeted, don’t wait to take action. Getting the right help can make all the difference in protecting your finances and resolving any issues quickly and effectively.