How to Identify and Avoid Tax Scams
Getting ready to file taxes? Learn how to spot schemes that circulate during tax season to help protect your finances
Tax season can be an emotional time in different ways. It might be hard to find a day in your busy calendar when you can squeeze in a few hours to gather tax documents. You might be either excited about a potential tax refund or unsure of what to expect this season.
Scammers are aware of these stress points and often try out schemes that play on the emotions of victims. For instance, they might post fake ads on social media or set up phony websites that appear to be tax refund companies. In these situations, they could falsely promise a higher-than-usual tax refund in order to cause a stir of excitement. They could also call, pretending to be the IRS. Over the phone, they may relay a threatening message to try to evoke fear about owing taxes.
Knowing about common tax schemes can help you identify them. Spotting a scam can also make it easier to avoid becoming a victim. You could even use your knowledge to help both you and your loved ones stay safe during tax season. Here’s what you need to know about common scams and how to stay safe.
Common Tax Scams
While scammers operate year-round, they tend to add tax-related schemes to their mix from January to April. During this season, scammers look for opportunities to steal personal identity data and information about financial accounts as individuals go through the filing process. Here are several common scams that circulate around tax time.
- Tax-related identity theft: This type of crime occurs when a person steals your personal information. They use the data, including your Social Security number, to file a tax return in your name. Scammers then claim the tax refund. You might not learn about the scam until you try to file your tax return. For instance, you may be unable to file your tax return because someone has already filed a return using your Social Security number.
- IRS impersonation email scam: In this scheme, scammers act as the IRS and send out email messages you aren’t expecting. The subject line may refer to taxes, and the messages may include links that look similar to the IRS website. Once you click on them, however, you may be directed to a fake website or asked to open a malicious file that can infect your device. Scammers may then steal sensitive information from your financial accounts.
- Phony calls, texts or social media messages impersonating the IRS: Through this scam, a scammer makes a call (or sends a text or social media message) and impersonates the IRS. The scammer then asks you to share sensitive information. For instance, they may say they are calling on behalf of the IRS. Then they state they have your tax return and need to verify your information, or that there are issues with your tax return. To resolve the matter, they request personal details such as your Social Security number or personal financial information. These scammers may also send a similar text message or social media message. In the message, they direct you to call a number or click on a link for more information. If you respond with your personal information, they may access and use it.
- Ghost tax preparer: Sometimes scammers pose as tax preparers and offer to help you with your tax return. They don’t, however, sign the return or include a Preparer Tax Identification Number (PTIN). (The law requires paid tax preparers to both sign and include their PTIN.) Known as a ghost tax preparer, this type of thief may promise you a large refund and charge more money to prepare the returns. They could steal your personal information during the process.
- Fake charity requests: Criminals may set up false organizations that claim to help people going through a difficult situation, such as the COVID-19 pandemic. They might even say they are working with the IRS to help individuals get tax refunds or file claims. They ask for personal financial information or donations. These fake charities do not have an Employer Identification Number (EIN), which is required to verify an organization.
- Request for payment scams: In these schemes, scammers claim you owe money. They may ask for payment in the form of a gift card. They might add that if you don’t provide a gift card, you’ll have to pay a large fee or even suffer extreme consequences such as going to jail.
Avoiding Tax Scams
Knowing what to watch for can be the first step in steering clear of suspicious activity. In addition, recognizing a few traits about the IRS—such as what the IRS typically does and doesn’t do—can also make it easier to identify tax scams. Here are a few ways to avoid these schemes.
- File taxes early: If you’re able to file taxes before the usual April 15 deadline, you may gain an extra layer of protection against scams. Criminals are less likely to be able to use your personal information to file in your name if the IRS has already received your information.
- Be wary of texts, emails or social media messages: If you receive an unexpected email, text or social media message about your taxes, don’t open or download any attachments. Instead of replying, you can contact the organization the message came from at an official phone number or email. If you have already filed your taxes, check for any issues by logging in to the official organization website through which you filed. Be careful when clicking a link in an email, as scammers often use legitimate-looking emails to direct you to their malicious sites.
- Understand how the IRS operates: Under typical circumstances, the IRS notes that it generally communicates to taxpayers through the United States Postal Service. For this reason, if you receive an unsolicited call, a text message, a social media message or a knock at your door from a person who claims to be from the IRS, don’t provide any information. You can hang up or close the door, and then contact the IRS to check on any tax issues.
- Be ready to examine: Before working with a tax professional, you can carry out a few steps to check for legitimacy. You might, for instance, ask a tax preparer to see their PTIN. You could also request that other organizations, such as a charity, send you their EIN so you can confirm their charity status through the IRS tax exempt organization search tool.
Reporting Tax Scams
If you see suspicious activity or think you may have fallen victim to a tax scam, you can report the situation. Here are a couple of strategies to keep in mind if you think you’ve spotted or have been subjected to a tax scheme:
- Report suspicious messages: If you receive a suspicious email about taxes, you can forward it to email@example.com. If you’ve clicked on links within the email or entered personal information, you can go to the IRS Identity Theft Central page to report the incident. You can send a message to firstname.lastname@example.org about phony calls; you can also file a complaint. Suspicious text messages can be forwarded to the IRS at 202-552-1226.
- Identify suspicious tax preparers: If you think a tax professional isn’t following the IRS guidelines, you can report them through the IRS website.
- Contact organizations mentioned: If you receive a suspicious email, text, or social media message about taxes that claims to be from your bank or financial institution, you should notify that bank or financial institution directly. For suspicious tax activity related specifically to any Capital One accounts, please notify us by sending an email to email@example.com and forwarding any emails or suspicious phone numbers and including as many details as possible pertaining to the suspicious message. If you want to learn more about identity protection at Capital One, see the Identity Protection page on the Capital One website.
When tax season rolls around, it can be easy to feel tense about finances and safety. Starting the filing process early and being aware of common tax scams can help create a sense of calm. You’ll know what to expect and may feel confident about spotting anything suspicious. Best of all, it can be empowering to feel that you’re protecting both your personal and financial information.
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