Let’s cut straight to it. Thousands of people are victims of tax scams. Millions of dollars have been lost as a result. Don’t let yourself become part of this terrible statistic.
People fall for tax scams and fake IRS scams every day. As of September 2017, just one of these scams cost victims more than $60.7 million, according to the Treasury Inspector General for Tax Administration. And with the recent Equifax breach, you might be even more vulnerable to risk.
Not only can these scams cost you money, but they also may compromise your personal data. This opens the door to more long-term trouble like identity theft.
Learn how the scams work and how to protect yourself:
Common Tax Scams to Watch Out For
Many scams have the same basic pattern. They use trickery to get you to share personal data or pay money based on a false threat.
Before you can learn how to protect yourself, you need to be able to identify a scam. Here are some of the most common tax-related scams to look out for:
IRS Impersonator Phone Scam
Someone calls you pretending to be from the IRS. They use fake names and fake IRS badge numbers. Sometimes they even adjust the caller ID so it looks like the call is coming from the actual IRS.
They may tell you that you owe the IRS money and threaten to arrest you or suspend your driver’s license if you don’t pay immediately with a wire transfer or gift card.
Or they may tell you that you are owed money from the IRS and in order to claim it, you will need to share personal data like social security numbers or bank account information.
These scams also might target people who speak another language, with the call coming in your native language. Or if you’re deaf or hearing impaired, these scams may come through video relay services.
Phishing, Texting and Malware Tax Scams
You get an email that appears to be from the IRS. It might say something like “we’re processing your request” and then asks for personal data from you to finish the process.
Or the email might tell you that you need to update personal information and direct you to a bogus IRS website or trick you into opening an attachment that has malware on it by asking you to review your personal information on the attached file. Similar email scams might appear to be coming from a tax software company or your financial institution.
The same basic scams may also happen through text message instead of email. These scams will try to get you to go to a certain website for important tax information, but if you open the link, your device will be compromised with malware that steals your personal information and corrupts your files.
Federal Student Tax Scam
This scam may combine any of the scams above, with parents or students getting fraudulent emails, calls or texts that claim to be from the IRS. The hook of this scam is that the fraudster asks for payments for taxes that don’t actually exist, like the “Federal Student Tax.”
Scams like this use scare tactics to try to get victims to pay up right away. They may say that the student won’t be able to register for classes or will lose financial aid unless the fake tax is paid.
IRS Ransomware Scam
Ransomware scams prevent you from using your smartphone or computer until you pay the scammer a ransom. There are many variations of this scam, some of which impersonate the IRS or FBI to try to trick you.
It may start with an email that pretends to be from the IRS and includes a hidden malicious link that infects your machine with ransomware. Then once the ransomware takes over, you could get a message that appears to be from the FBI demanding payment. This is when your device will freeze and become unusable due to the infected malware.
Tax-Related Identity Theft
If your identity has been stolen, thieves may use your personal data to file fraudulent taxes in your name and then collect your tax refund. If you experienced identity theft of any kind, you may want to report this to the IRS and put a fraud alert on your credit reports.
If you’re not sure whether you’re a victim of identity theft, but you get notified that your return has already been filed when you attempt to do your taxes, let the IRS know right away. You will have to fill out an Identity Theft Affidavit.
To help prevent the risk of tax-related identity theft, it’s always a good idea to file your taxes as soon as possible.
How to Protect Yourself from Tax Scams
Tax scams have become so common that new ones pop up every day. So it’s important to learn how to identify phishing emails, phone scams and other schemes that can cost you.
Since tax season is such a busy time for scammers, you’ll want to be even more alert during this time of the year. Here are some ways to protect yourself:
- Remember that the IRS NEVER asks for credit or debit card information over the phone
- Know that the IRS DOES NOT ask for immediate wire transfers, gift cards or prepaid debit card payments
- Keep in mind that the IRS WILL NOT use email, social media or text messages to talk about your personal tax bills or refunds
- Be aware that the IRS WON’T threaten you with arrests if you don’t pay immediately
- Make sure you NEVER click on a link in an email unless you know where it is going or open a suspicious attachment
- If you get a phone call that claims to be from the IRS, DO NOT give out your personal information
- ALWAYS file your taxes early to help prevent the risk of identity theft.
When in doubt, it’s always best to be cautious. So if you’re not sure whether an IRS call is legitimate, for example, hang up without giving personal information and call the IRS directly at 1.800.829.1040.
You can see a list of tax scams and consumer alerts on the IRS website. If you hover over that link before you click on it, you’ll see that it does indeed send you to irs.gov, the official IRS website. That’s good practice for avoiding malicious links in phishing emails!
If you receive a tax-related phishing email, you can forward it to firstname.lastname@example.org, then delete the email. This helps them report on the latest scams.
You can also share this article on social media or send it to friends and family to help them stay aware of how to protect themselves from tax scams.