Tax scams can lead to a long and tricky process of recovering your identity. Stay informed by learning about 15 IRS tax scams you should avoid so you don’t become a victim of tax fraud this filing season. For year-round protection, contact Tax Resolution Services of Hawaii for a consultation to help guard against tax scams and identity fraud.
Falling victim to a tax scam can have lasting effects that hurt your financial health. It’s important to be aware of these scams to safeguard your finances.
By staying alert and learning how to recognize and avoid tax scams, you can protect yourself from the harmful consequences of fraud and identity theft.
In this guide, we’ll uncover 15 of the most common tax scams to be aware of. From IRS impersonators to fake payment requests, we’ll guide you on how to effectively avoid tax scams.
15 Tax Scams To Avoid
1. Illegitimate Unemployment Benefits
Illegitimate unemployment benefits scams are a type of federal tax fraud that often starts with scammers obtaining sensitive information through methods like data breaches, phishing emails, or fake apps. Once cybercriminals have enough personal information, including Social Security numbers, they can file fake unemployment claims on behalf of unsuspecting victims to illegally receive benefits.
What scammers might say:
“Hello, this is the IRS contacting you to verify your information. We suspect you may have been involved in a data breach. Please confirm your Social Security number and address to protect your data.”
2. Unclaimed Refund Mail Scams
Unclaimed refund mail scams involve criminals sending you letters claiming that you have an unclaimed tax refund waiting for you. These letters usually arrive in a cardboard envelope delivered by a delivery service. The letter features the IRS logo and a phone number that doesn’t belong to the IRS. If you provide your personal details, you could become a victim of identity theft.
What scammers might say:
“We’re reaching out regarding your unclaimed tax refund. To complete the processing, we need your personal information. Please call or email us using the contact details provided in this letter.”
3. Employee Retention Credit Scam
In an employee retention credit scam, third-party promoters advertise their services or send direct mail campaigns about the Employee Retention Tax Credit (ERTC). These fraudsters often exaggerate who qualifies for the credit and charge upfront fees to claim it for you. If you aren’t eligible, you could be required to repay the credit and may not be able to recover the fees you paid. Before applying, always check the ERTC requirements.
What scammers might say:
“We’re reaching out to inform you that you qualify for the Employee Retention Tax Credit. To have us process this for you, simply pay the fee listed below.”
4. W-2 Form Phishing Scam
In a W-2 phishing scam, criminals attempt to steal employees’ W-2 forms by impersonating a senior figure in the organization, such as the CEO or CFO. They usually target HR staff or the finance department to obtain these sensitive documents.
What scammers might say:
“This is Greg. I need everyone’s W-2 forms in one file as soon as possible. We’re under IRS investigation, and I need to confirm that all forms were filled out correctly.”
5. Tax-Deductible Charity Fraud
Tax-deductible charity fraud occurs when criminals impersonate legitimate charities to scam money from well-meaning individuals. If you donate to these fake charities, your funds won’t support the cause you intended, and you won’t be able to claim a tax deduction because the money didn’t go to a registered charity.
What scammers might say:
“Make a tax-deductible donation to our charity and enjoy generous tax benefits while supporting those in need.”
6. “Ghost” Tax Return Scam
In a “ghost” tax return scam, dishonest tax preparers—known as “ghost preparers”—prepare your tax returns but don’t sign them. They often charge fees based on the size of your refund. These scammers may use fake deductions and other deceptive practices to inflate your refund and their commission, putting you at risk of trouble with the IRS.
What scammers might say:
“As expert tax preparers, we guarantee to double your refund. Plus, for your convenience, we handle everything online.”
7. Natural Disaster Relief Fund Tax Scam
Natural disaster relief fund tax scams exploit the aftermath of major disasters by pretending to offer aid to affected communities. Scammers may pose as government agencies promising financial support to those impacted by a disaster. Their goal is to trick victims into sharing personal information online or making payments to fake relief funds.
What scammers might say:
“Help disaster relief efforts by donating to our local fund for survivors. For a quick donation, use a cash app or send gift cards.”
8. Tax Consultant Fraud
Tax consultant fraud involves individuals or firms pretending to be expert tax professionals who offer to help with your tax obligations. These fraudulent consultants might promise to reduce your tax liabilities or increase your refunds. However, their inaccurate filings or illegal tax avoidance tactics could lead to audits, penalties, or legal issues. They might also redirect your refund to their own account.
What scammers might say:
“Hello, I’m a tax consultant offering special services to reduce your tax liabilities and boost your refunds. Simply provide your personal and financial information, and I’ll take care of everything.”
9. Gift Card Tax Scam
Gift card tax scams often spike during the holiday season. Scammers may ask you to settle a fake tax bill using gift cards. They typically request these payments over the phone, but they may also use text messages, emails, or social media to make their demands.
What scammers might say:
“We’re calling from the IRS, and you owe back taxes. To prevent arrest, buy $200 in gift cards and give us the codes for immediate payment.”
10. Tax Refund Recalculation Scam
In a tax refund recalculation scam, criminals reach out claiming they’ve recalculated your IRS refund and that you’re owed more money. They might ask you to click a link, which leads to a fraudulent or spoofed website designed to steal your bank account information.
What scammers might say:
“We’ve recalculated your tax refund and need your bank details to send you the extra amount. Please enter your bank account information to speed up the process.”
11. Stimulus Payment Scam
In a stimulus payment scam, you might be asked to click a link to receive your payment, which takes you to a page requesting personal and financial information. Remember, the IRS will never contact you through email or text message initially and will never ask for personal data. Since there are no fees to receive a stimulus check, scammers are trying to steal your identity or money.
What scammers might say:
“To receive your stimulus payment, provide your Social Security number and pay a small processing fee. Act quickly to make sure you don’t miss out!”
Scammers can misuse your personal details. If you suspect fraudulent activity related to your taxes, consider using a tax resolution service like ours. We specialize in addressing issues with tax fraud and can help resolve any problems with your tax filings. Contact us now for expert assistance in safeguarding your tax affairs.
12. Tax Lien Scam
In a tax lien scam, cybercriminals impersonate a fake agency with a believable name, such as the “Bureau of Tax Enforcement,” threatening you with an IRS lien or levy. These scams are usually carried out by mail. If you don’t owe taxes, scan the letter and send it to [email protected]. If you’re unsure about your tax status, verify the letter by calling the IRS at 800-829-1040.
What scammers might say:
“To prevent a federal tax lien, pay your tax debt in full immediately.”
13. Tax evasion police scam
A scammer may impersonate law enforcement officers, claiming to represent the tax authorities and accusing you of tax evasion. They use tactics like threats of arrest, imprisonment, deportation, or imminent legal action. If you comply with their demands, it could lead to a long road to recovery from identity theft.
What scammers might say:
“This is Officer Smith from the IRS Criminal Investigation Unit. You’re being investigated for tax evasion, and a warrant for your arrest will be issued unless you pay your outstanding tax debt immediately.”
14. IRS Debt Collection Scam
In an IRS debt collection scam, criminals impersonate the IRS, claiming you owe back taxes, penalties, or interest, and threaten severe consequences if you don’t pay. They might use caller ID spoofing to make it appear as though the call is from the IRS. They may also request payment methods like Zelle, which the IRS would never accept.
What scammers might say:
“Hello, this is the IRS notifying you of an outstanding tax debt. If you don’t settle it immediately, you’ll face legal action, including arrest or asset seizure.”
15. Offer in Compromise Scam
An Offer in Compromise (OIC) scam tricks you into paying upfront fees by promising to settle your tax debt for less than the full amount. While the IRS does offer legitimate OIC programs, scammers exaggerate your chances of qualifying and pocket your money without helping you negotiate with the IRS.
What scammers might say:
“You owe the IRS money, and they’re getting ready to seize your assets. We can help you settle 100% of your tax debt for just a fraction of what you owe.”
How to Spot Tax Scams
Recognizing tax fraud is essential for safeguarding yourself and your finances. Here are ten essential tips to help you recognize tax scams and avoid becoming a victim of fraud.
- Unsolicited Communication: Be cautious if you receive unexpected phone calls or emails claiming to be from the IRS. Always verify their authenticity before sharing any personal information.
- Pressure Tactics: Scammers frequently use high-pressure tactics to scare you into action, like threatening arrest or demanding immediate payment. Stay calm and verify any such claims before giving out personal information or making any payments.
- Request for Payment: The IRS will never insist on immediate payment or ask you to use methods like gift cards. Always use official channels for any tax-related payments.
- Phony Email Requests: Watch out for emails that pretend to be from the IRS. Avoid clicking on any links or opening attachments. Remember, the IRS will never ask for personal information through email.
- Fraudulent Text Messages: The IRS will not reach out to you via text message for personal or financial details. Ignore any texts requesting such information.
- Social Media Outreach: The IRS does not use social media platforms like Instagram or Facebook to request personal or financial information. Be cautious of any such messages.
- Unofficial Tax Forms: Always verify the authenticity of IRS forms and notices by checking them on the official IRS website or contacting the IRS directly.
- Fake IRS Credentials: If you get a surprise call from someone claiming to be from the IRS, it’s likely a scam. IRS employees will always send a letter or bill in the mail before calling and will never demand immediate payment.
- Untraceable Payment Methods: The IRS provides several payment options but does not accept payments through gift cards or cash apps. Use official payment methods for any tax-related transactions.
- Threats and Intimidation: The IRS cannot revoke your driver’s license, business license, or immigration status, and will never make such threats. Be wary of anyone who tries to intimidate you with these claims.
Always verify the authenticity of any communication claiming to be from the IRS. If you encounter suspicious activity, report it to the appropriate authorities immediately.
Conclusion
In today’s world, staying vigilant against tax scams is crucial to protecting your financial health. Scammers use various tactics to defraud unsuspecting individuals, from impersonating IRS officials to misleading letters about unclaimed refunds. Knowing the common types of tax scams, such as fake unemployment benefits claims or phishing schemes targeting W-2 forms, is the first step in safeguarding yourself. By being aware of these scams and recognizing their warning signs—such as unsolicited communications and high-pressure tactics—you can better protect yourself and your personal information.
One of the most effective ways to defend against tax fraud is to remain informed and cautious. For instance, the IRS will never demand immediate payments via unconventional methods like gift cards or threaten you with legal action over the phone. Always verify the authenticity of any correspondence claiming to be from the IRS by contacting them directly through official channels. If you suspect that you’ve been targeted by a scam, it’s essential to act quickly and report the fraudulent activity to the proper authorities.
For those dealing with tax issues or looking for a fresh start, Tax Resolution Services of Hawaii can offer valuable assistance. Our services include Offer in Compromise (OIC), penalty abatement, and various other tax relief options designed to simplify your journey toward financial recovery. Whether you’re dealing with collections holds, garnishment releases, or need help with formalized installment agreements, we can guide you through the process with minimal effort on your part. Contact us today to explore how we can help you achieve tax relief and a secure financial future.
FAQs About Tax Scams
Got more questions about tax scams? We’ve got all the answers you need.
1. How Can You Spot Tax Scams?
Recognizing tax scams early can save you from major headaches. Be on the lookout for red flags such as unexpected demands for immediate payment, threats of arrest or legal consequences, and requests for payment through unusual methods like gift cards or unauthorized payment methods.
2. How Can You Tell if You’ve Been Scammed on Your Taxes?
If you suspect a tax scam, check for signs like unauthorized transactions on your financial accounts, unexpected IRS notices about unreported income, or records indicating a duplicate tax return. These could be indicators that you’ve been targeted by a scam.
3. How Does the IRS Reach Out to You?
The IRS usually contacts taxpayers through mail. They might follow up with a phone call after sending a bill, but they will never demand immediate payment or threaten legal action. Always verify the legitimacy of any communication claiming to be from the IRS.
4. What Steps Should You Take if You Fall Victim to IRS Tax Scams?
If you find yourself a victim of an IRS tax scam, act quickly: report the scam to the IRS, freeze your credit report to prevent further damage, and carefully review your credit accounts for any suspicious activity. Reporting the scam not only helps protect others but can also aid in bringing the scammers to justice.
5. What Was the COVID-19 Relief Fund Tax Scam?
The COVID-19 relief fund tax scam targeted people and businesses during the pandemic. Scammers pretended to be official sources offering financial aid or tax relief through government programs. Their goal was to trick victims into sharing personal information under the guise of providing assistance.
