Dishonest individuals are always on the hunt for personal information that they aim to use for tax-related identity theft. They rely on the notion that many taxpayers are intimidated by the IRS and will go to great lengths to remain compliant. Each year, the IRS publishes the Dirty Dozen, which warns taxpayers of the year’s 12 most prominent scams to avoid.
Common Tax Scams Seeking Personal Information
The IRS cautions taxpayers to be on the lookout for deceptive communications via email, text messages, or phone calls, where bad actors may attempt to obtain personal information, namely Social Security numbers, bank account numbers, and credit card information.
Below are some frequently asked questions related to IRS scams along with some general information and how you can protect yourself.
How Can You Recognize IRS Tax Scams?
Fraudulent actors typically send unsolicited emails containing attachments or links to websites. No matter how legitimate the source may appear, never click on any links or attachments in suspicious emails.
Be suspicious of any phone calls where the caller identifies themselves as an IRS employee in need of information to resolve a tax dispute or tax lien. The IRS will never call you on the phone asking for personal information.
These bad actors may also pull information from social media accounts and pose as family members to extract information. Thieves who run this scam often:
- Use common names and fake IRS badge numbers.
- Know the last four digits of the victim’s Social Security number.
- Look like the IRS on your caller ID.
- Send fake IRS emails to support fake calls.
- Make background noise to simulate other calls being conducted, as if from a call site.
- Call a second time claiming to be the police or department of motor vehicles, often also supported by false caller ID.
Best Practices Against Tax Scams
If you’re ever pressured to give your personal information, you have good reason to suspect a scam. Some best practices to consider are as follows.
- Scammers often try to coerce potential victims into quick action. There’s never any extreme urgency that would require you to provide your personal information. If you feel unduly pressured, state that you’ll have to check with your financial advisor before reaching out at a later time.
- Ask the caller for a case ID number. State you’ll be calling back to a verified phone number from the IRS website.
- Hover over email hyperlinks to see if the URL address looks authentic. DON’T click on them.
You can find more tips in the “How to Further Protect Yourself” section discussed later.
What Are the Red Flags of an IRS Scam?
Taxpayers and tax professionals should be vigilant in protecting themselves. Again, the IRS will never initiate contact through phone calls, email, or social media.
All contact from the IRS should be initiated by mail correspondence. If you’re suspicious, you can always confirm the legitimacy of any correspondence by contacting IRS customer support.
Most importantly, remember that the IRS will:
- Always begin by sending a letter if a taxpayer owes taxes.
- Never initiate contact by phone, email, or text message.
- Never call to demand an immediate payment through gift card or wire transfer.
- Never threaten arrest or deportation.
You can always review any suspicious occurrences with your personal financial professional as well.
Additional IRS Scams
Other common IRS scams attempt to take advantage of the public’s generosity, meaning that scammers may set up fake charitable organizations and contact unsuspecting individuals to collect money. This type of scam rises in popularity during a well-publicized natural disaster or tragedy. You should always research any organization or fund before donating.
The IRS has a database where you can search for tax-exempt organizations when verifying an organization’s legitimacy.
Who’s at Risk for IRS Scams?
Senior citizens and groups with limited English proficiency are common targets for scammers. These scams typically come by phone. They are often very aggressive in nature, threatening jail, deportation, or revocation of a driver’s license unless cash payments are immediately made.
To address language barriers, the IRS provides a form where taxpayers can select their preferred language. If a taxpayer has selected a language other than English, the IRS won’t contact them in English without the preferred language also being present.
Emerging State Tax Scams
Tax scams don’t just occur at the federal level. Remain just as discerning when contacted by someone purporting to be from a state agency.
Best practice is to research before providing information or money to anyone. Many state agencies publish the most commonly reported scams.
How to Further Protect Yourself
There are several other ways you can further protect yourself from common tax scams.
Be Suspicious of Emails, Phone Calls, or Texts Claiming to Be from the IRS
If you receive an unsolicited email claiming to be from the IRS, you can report it to email@example.com.
If you get a phone call from someone claiming to be from the IRS, and you think you owe taxes, hang up and call the IRS at (800) 829-1040 or call your tax advisor.
If you have no reason to think you’d owe any taxes, hang up and call to report the incident to the US Treasury Inspector General for Tax Administration at (800) 366-4484.
Don’t Trust Emails Asking for Information
Criminals often pose as someone from a trustworthy source, like an organization or tax preparer, and ask for personal information, money, and passwords. A best practice is to always call the sender directly if an email or request seems unusual.
Don’t Click on the Link
Be suspicious of emails from unknown senders or familiar seeming emails that seem off in some capacity. Fraudsters may send emails asking recipients to open attachments or click on links that redirect to a fake website in hopes of stealing sensitive information.
Never click on a link or open an attachment in an email sent from a suspicious account. If a link or sender ever seems remotely suspicious, go directly to the website instead.
Check the URL Before Clicking
An email sender may send a link that at first glance looks correct—irs.gov, for example—but when clicked, the link takes the user to a fraudulent website.
A good practice is to hover over a link to view a pop-up of the actual URL and make sure it’s legitimate.
Monitor Your Tax Record
The IRS has an online tool that allows you to monitor your tax account, where you can register your account and pass a validation process as part of the stringent identity theft protections at the IRS. validation. Once you’re authenticated, there are two benefits:
- You can tell if someone has filed a fraudulent return using your information.
- You can obtain transcripts to see if the IRS believes you owe any tax.
IRS Identity Theft Affidavit
If you suspect you’ve been targeted for a scam or that your information has been compromised through a data breach, consider filing an Identity Theft Affidavit, Federal Form 14039 to increase the security of your account with the IRS. This is an extra precautionary measure to prevent a fraudulent tax return from being filed under your name and Social Security number.
You can report any money-related loss connected to an IRS scam to the Treasury Inspector General Administration and file a complaint with the Federal Trade Commission.
We’re Here to Help
The IRS Dirty Dozen is updated annually in the summer. Staying up to date on the most prevalent scams will reduce the risk of falling victim. Scammers will continually look for ways to stay one step ahead.
For a deeper understanding of the most common tax scams plaguing businesses and individuals or to learn more about tax controversy and gain access to developments as they unfold, contact your Moss Adams professional.