Common IRS tax scams and how to protect yourself

Every tax season, there are criminals that are looking to relieve you of some of your hard-earned money. However, in this article, we are going to focus on how to protect against tax scams, specifically. We will be covering the five most common IRS tax scams as well as how the IRS normally communicates with you. In the end, you will have a greater understanding of how these scams work and what you can do to protect yourself. Of course, you always have the option to consult with some of the best tax relief companies and learn more about avoiding any financial complications.

How to protect against tax scams?

person typing on a keyboard
Most common IRS tax scams involve you entering your personal information.

The most important thing is to be aware of them. Once you know what to look out for, you are better equipped to avoid it. Therefore, simply knowing that tax scams exist is a very good start. Next up, you will want to make sure that you know how they actually work. How are these scammers taking away your money, exactly? Covering every single tax scam would be a colossal undertaking, so reading up about the most common IRS tax scams is the logical next step.

Five most common IRS tax scams

  • Tax-related identity theft
  • The “gift card” scam
  • Refund recalculation scam
  • Stimulus payment scam
  • Taxpayer advocate scam

Most of these scams are only possible because the scammers induce stress and fear in their victims. If you do not react swiftly, you’re led to believe that there will be serious repercussions. And that is how they get you. Let’s see exactly how that works.

#1: Tax-related identity theft

Let’s say that you have a big tax refund coming your way this year. If this information gets into the hands of criminals, they might decide to do something about it. What they do is steal your personal information. They get your Social Security number, birthdate, address – the whole 9 yards. With that information, they file an income tax return in your name and steal it for themselves.

Identity theft is a serious concern and we will not go into the details of how you should prevent it in the first place. But if you happen to be a victim of tax-related identity theft, there are a few things that can provide you with a clue.

How to spot tax-related identity theft?

person carefully looking at a phone, showing how to protect against IRS tax scams
If you get any unusual account activity, act immediately.

If you are filing your return online and the IRS rejects it, stating that the tax return is already filed and already connected to your Social Security number, that’s a dead giveaway. And if you happen to be mailing your tax return and the IRS sends you a letter stating the same fact, someone stole your personal information.

You can also receive a notification from the IRS that an online account has been created in your name. If you know that you never signed up for such an account, follow it through. Most likely, someone got hold of your info and is trying to scam you.

If the IRS sends you any transcripts, mails, or similar correspondence that you haven’t requested, it is a cause for concern.

What to do if you are a victim of this scam?

If you find out that your personal information has indeed been stolen, you will want to complete the IRS form 14039, Identity Theft Affidavit. Attach that form to your paper tax return and mail it to the IRS, as per instructions on the form. Report the theft to the Federal Trade Commission as well, and contact Experian, Equifax, and TransUnion and have them place a fraud alert on your credit card accounts.

#2: Gift card scam

Another very common IRS tax scam goes by the name of “gift card scam”. The scammers contact you by phone or leave a voicemail that claims that you owe federal taxes and are about to be branded as a criminal. If you answer the call or follow through with the voicemail (they always leave a callback number), they will tell you that you need to pay a penalty fee via gift cards from various stores. Once you get these cards, scammers will ask for the card’s number, as well as its PIN. The rest is pretty self-explanatory.

All you need to do to protect against common IRS tax scams of this type is to understand that the IRS will never call you about taxes that you owe, nor do they request gift cards as means of paying penalties. To avoid this scam, simply hang up or just ignore the voicemail.

#3: The refund recalculation scam

The next scam has to do with the basic human instinct to get the most out of our tax refunds. The criminals exploit this fact by contacting you and stating that your IRS refund has been recalculated and that you are getting more money back from your taxes. Needless to say, this sounds “too good to be true” because it is not true.

The issue is that the scammers usually communicate with you presenting themselves as the IRS, complete with the official IRS logo. They ask you to click on a link that takes you to a page where you enter your personal information. Once you do so, scammers have everything they need.

person clicking a mouse
All you need to do is click on the wrong link and you may be a victim of a tax scam.

To avoid this scam, all you need to do is understand how the IRS operates. They will never contact you through an email, they will send it by traditional mail. Furthermore, the IRS will never ask for your personal information through your email. If you get an email from the IRS asking you to click on any links, delete it. That will be enough to protect against common IRS tax scams such as this one, that involves any refund recalculations.

#4: Stimulus payment scam

This one is rather new, brought by the COVID-19 pandemic. You might already be aware that the government sends out stimulus checks to taxpayers on occasion, due to the pandemic. The scam works much like the refund recalculation scam does, with you clicking on a link and filling out personal information.

Therefore, it is simple to avoid, as well. You might want to avoid clicking any links in your mail on general principle. It is a good rule to live by.

#5: Taxpayer advocate scam

The IRS has a Taxpayer Advocate Service which helps taxpayers handle particularly tricky tax issues. This service also presents scammers with opportunities. This is a scam that requires a significant degree of “con-artistry”. The scammers will contact you with a phone that looks similar to the one that the IRS Taxpayer Advocate Service office uses and will request your personal information before they can provide you with assistance.

Again, the best way to protect against one of the most common IRS tax scams is to simply hang up or not call back. Whenever someone says that they are calling you from the IRS, feel free to hang the phone on them. You can then contact the agency and make your own inquiries.

  • For more information about tax relief issues and how best to resolve them, explore Consumer Opinion Guide as well as our premium selection of tax relief companies!

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