Learn about the most common IRS scams in 2021 and protect yourself against fraud, identity theft, or stolen tax returns.
There are a lot of new and old ways being used to trick taxpayers and tax preparers alike, like fake emails and phone calls, or even holding important documents they’ve stolen up for ransom.
Protecting your information and important documents is the key to avoiding tax scams. Knowing a thing or two about what tax scammers are doing and how they’re doing it can also help you spot a scammer before you get taken advantage of.
What is an IRS Scam?
A tax scam is when someone uses tax season to steal private information. Many tax scams try and steal your personal information so they can file your taxes before you do, and claim your tax refund for themselves.
First, avoid getting scammed by understanding what scammers want.
They want to get you to pay for fraudulent services, they want your personal information, they want to claim your tax refund for themselves, and they want to hack into your accounts.
Second, learn to recognize the common characteristics of a scam.
If you know what a scam looks like then you’ll be much more likely to recognize a scam when you see it.
Common Characteristics of a Scam:
- They will try and make you panic
- They will try and get you to download something
- They will try and get you to click on links
- They will want you to pay in prepaid cards, gift cards, or wire transfers
- They will demand immediate action and try to rush you
- Their site won’t be secure
- They will contact you in a way that the IRS won’t, like through emails, phone calls, or texts
- Their promises will sound (and be) too good to be true
Examples of Common IRS Scams
The official website of the IRS is a great place to go for information and resources about tax scams. The IRS publishes an updated list each year called the Dirty Dozen to help taxpayers recognize scams and avoid them.
Below are a few common IRS scams to avoid this year:
Avoid IRS Scam Calls
You might receive a phone call from a person claiming to be an IRS agent. These fake IRS agents may even threaten you over the phone with legal action, police arrests, deportation, or license confiscation, but these threats are empty. They are only trying to make you think you are in trouble so that you panic and give them what they want.
If you receive a phone call from someone claiming to be an IRS agent you can know right away that it is a scam.
The IRS states the following on their website about IRS scam calls:
“The IRS will never demand immediate payment, threaten, ask for financial information over the phone, or call about an unexpected refund or Economic Impact Payment. Taxpayers should contact the real IRS if they worry about having a tax problem.”
If you receive a threatening or demanding call from the IRS, rest assured it is a scam and feel free to hang up and block that number.
Avoid Email Scams
Some tax scams will try and pretend they are the IRS through email scams in order to get you to pay them or give them information. Email scams impersonating someone they are not is called phishing.
Phishing is when a tax scammer sends out emails or even creates a fake website to trick people into thinking they are the IRS.
The IRS states the following on their website about IRS email scams:
“The IRS will never initiate contact with taxpayers via email about a tax bill, refund or Economic Impact Payments. Don’t click on links claiming to be from the IRS. Be wary of emails and websites − they may be nothing more than scams to steal personal information.”
So if you receive an email claiming to be from the IRS, you can immediately know it’s a scam and report it. Do not click on any links or respond to any emails claiming to be from the IRS. By interacting with a fake email you can jeopardize your accounts, devices, and personal information.
Avoid IRS Scam Letters
Phishing scams can also take the form of letters in the mail. These letters will say a lot of the same things email scams will say, that you owe delinquent taxes or that you need to make some kind of payment.
If you do receive a legitimate letter in the mail from the IRS, it will be in the form of an official 5071C letter, 5747C letter, 6331C letter, 5447C letter, 4883C letter, or a 6330C letter.
Avoid Social Media Scams
Social media can be a dangerous place when not used with caution. We share lots of personal details about ourselves on social media, and scammers can then use that information to take advantage of you.
For instance, many scammers will use information on social media to impersonate someone you know to get you to trust them. After they’ve successfully tricked their victims into thinking they’re a family member or a friend, they’ll send links containing malware, get you to give them sensitive information, get you to do something for them, or hack your own accounts.
Avoid social media scams by being cautious about what information you put on social media. Be wary of using messaging platforms on social media too much or for sensitive information.
Avoid Tax Preparer Scams
Tax preparer scams can happen to tax preparers and taxpayers.
Taxpayers should be careful when choosing a tax preparer or tax preparation service. Some scammers will pose as tax preparers in order to steal your personal information or your tax refund money.
Some of these scammers will try to falsify information on your tax return in order to get a higher tax refund that they can then steal all or part of, and then leave you to pay the high penalty fees.
Always research your tax preparer or tax preparation service provider before deciding on where to go to get your taxes filed.
Avoid Tax Evasion Scams
There are several forms of Tax evasion scams you should be aware of. These types of scams will try and sell programs to help you avoid paying taxes.
Offshore Tax Avoidance
This scam helps clients try and hide their income offshore in order to avoid paying taxes on them. If you’ve been involved in any offshore tax avoidance, the best thing you can do is voluntarily catch up on your taxes to make things right.
Frivolous Tax Arguments
Some tax scammers will try convincing you to take part in frivolous tax arguments to try and avoid paying taxes. These cases are repeatedly thrown out in court, no matter what the tax scammer might say.
Abusive Tax Shelters
There are people who create complex tax avoidance schemes and then sell them to unsuspecting members of the public. Be aware that there are tax scammers like these, trying to peddle too-good-to-be-true schemes, plans, programs, or shelters.
How to Avoid IRS Scams
Avoid falling prey to IRS scams by keeping your information and identity safe. To keep tax payers safe from fraud, the IRS has a very specific way of doing things. If the IRS does reach out to you, they will do so in a very specific way so you know for sure it’s them.
For instance, the IRS directly states on their official website that they will never do the following:
- The IRS will not call you demanding immediate payment through a prepaid debit card, gift card, or wire transfer. If you do owe the IRS money, they will first mail you a bill, and you will never pay the IRS through prepaid debit cards, gift cards, or wire transfers. Scammers like to use these forms of payment because they are difficult to track.
- The IRS will never threaten to have you arrested.
- The IRS will never demand payment without allowing you to question or appeal what you owe.
- The IRS will never ask you to give them your credit or debit card numbers over the phone.
- The IRS will never suddenly call you about an unexpected refund for you.
Keep Your Information Safe
Carefully guard all of your personal information. You don’t want to give strangers or scammers easy access to any private or personal information about yourself or important accounts.
Perform a security audit on yourself once a year to make sure you are up to date on all the latest security measures you should be taking to keep your information safe.
How to Perform a Basic Information Security Audit
- Change your passwords
- Use complex passwords
- Don’t use the same password for everything
- Use security questions only you would know
- Check the access control configurations on all devices
- Use two-factor authentication
- Check the personal information you have public on social media accounts
Keep Your Identity Safe
Some criminals will try and use the tax season to steal identities. One of the primary ways that someone can steal your identity is by getting their hands on your social security number or card. Then they can pretend to be you and try to claim your tax refund.
Keep your personal information safe by never revealing your social security number to anyone, and by keeping your social security card in a safe and secure location. It is also a good idea to memorize your social security number so that you don’t need to carry your card in your wallet where it’s more likely to get stolen.
How to Report IRS Scams
If you come across a tax scam or fall prey to one, then you should report that scam with the IRS as soon as possible.
First, fill out a 14039 form and send it into the IRS.
If you have any other questions about how to report any kind of tax scam you can find the information you need on the IRS website, Tax Scams – How to Report Them.
You can also visit the official website of the Office of the Inspector General (OIG) and Social Security Administration.
IRS Identity Verification
There are cases where you will need to verify your identity for the IRS. Often this is for your benefit to help prevent identity theft or to keep people who are not you from getting your tax refund.
You will only need to go through the IRS identity verification process if you have received an official letter from the IRS (like a 5071C letter, 5747C letter, 6331C letter, or 5447C letter). Then you will simply follow the instructions outlined on the official IRS formatted letter.
What is a 5071C Letter?
A 5071C letter is an official letter from the IRS asking you to verify your identity. This letter lets you know that this correspondence is legitimate, because it uses a specific IRS format. This letter will direct you to the IRS website where you can securely use the official IRS Identity Verification Service to get your information with the IRS all sorted out.
The letter will also have a toll-free phone number you can call where a representative will help you through the ID verification process.
Tax season is already a stressful time without having to deal with tax scammers. You have enough on your to do list without the hassle of someone stealing your information or tax refund.
Use Check City’s tax preparation services to enjoy all the latest security measures when filing this tax season.