Stay Safe This Tax Season: How To Avoid Popular Tax Scams

Tax scammers are particularly active during tax-filing season. Preoccupation with your debts can make you more susceptible to these attacks. As a form of identity fraud, tax scams can cause anything from financial loss to criminal charges. In 2023, the IRS (Internal Revenue Service) reported $5.5 billion stolen in tax frauds.

You can stay safe by using a strong identity theft prevention service and adopting good security habits. Find out how to do that in our full guide below.

What are tax scams?

Tax scams are (usually) phishing attacks from someone trying to steal your money or financial information. Criminals will primarily target your:

• Social Security number: They can use your SSN to file false tax returns or claim refunds in your name.
• Personal identification information (PII): Your name, address, date of birth, and other personal details
• Financial information: Your credit card and bank account numbers
• Tax-related documentation: For example, copies of 1099 and W-2 forms
• Login credentials: Usernames and passwords for your online accounts, government portals, or tax preparation software
• Tax-filing info: If a criminal has information about your income, deductions, and credits, they could file fraudulent tax returns in your name.

With this personal and financial information, criminals can steal your identity and commit various tax-related frauds. The first step in preventing severe consequences is learning to recognize these attacks.

How do tax scams work?

Tax scams usually rely on phishing tactics to steal your money or personal information. They can take various forms, but the main idea is almost always the same.

It all starts with an innocuous message (phishing email or text) or phone call. Scammers will usually try to establish trust by impersonating IRS agents. They'll also create a sense of urgency (pay now to avoid arrest or deportation, for example). Criminals might not ask for money directly; they can also prompt you to click a malicious link or share private info they can use.

Fortunately, tax scams need your "cooperation" to succeed. We can't overstate the importance of staying calm and refusing to comply with the in-message demands. If scammers can't build trust with you or cause you to panic and act without thinking, they have nothing.

How to recognize a tax scam

Avoiding tax identity theft hinges on your ability to recognize scammers the moment they initiate contact with you. Here are some of the most common red flags to keep in mind.

• Suspicious requests from the IRS: On its official website, the IRS warns taxpayers that they'll never request personal info via text, email, or social media. If you receive such a request, it's most likely a scam.
• High-pressure tactics: The IRS agents won't threaten you or leave pre-recorded urgent messages. If you're threatened with arrest, deportation, or other dire consequences, you're dealing with a scammer.
• Unusual payment methods: The IRS will never request payments in crypto or gift cards. Scammers prefer them because they're harder to track, and recovering the funds is usually impossible.
• Poor writing: Phishing messages often contain grammatical errors and awkward phrases.
• Impersonal messages: Scammers usually cast a wide net with their phishing messages. Therefore, they'll likely address you with "Dear Sir/Madam."
• Strange email address: The IRS will never initiate email communication with you. You must consent to email correspondence to receive your documents electronically. Therefore, if you get an unsolicited email from the IRS, it's most likely a scam. Furthermore, the official email address format for IRS employees is employee.name@irs.gov. You can check that employee on the official IRS website before responding. If the email address doesn't match this format, you're talking to a scammer.
• Deals that are too good to be true: Some criminals will try to entice you with a great offer instead of scaring you. This can include a huge tax refund payment or scrapping your tax debt altogether.
• Unexpected refund notifications: If you get a tax refund notification before filing your taxes, it's a scam.

What are the most common tax scams

Tax fraud and initial scams are only limited by a criminal’s imagination. That said, spotting them gets easier as you learn more specific examples.

Here are some of the most common tactics used by tax scammers.

• Threats of legal action: Criminals impersonating IRS officials will accuse you of fraudulent activities. These claims can range anywhere from underreported income to tax evasion. They'll usually demand immediate payment via crypto, gift cards, or wire transfer. If you don't comply, they'll threaten arrest, deportation, or seizure of assets.
• Overdue payment scams: This approach is similar to threats of legal action. However, scammers focus on convincing you that you owe unpaid taxes or fees. They'll often try to make this scam more believable by citing bogus laws, regulations, and penalties.
• Offer-in-compromise (OIC) scams: The IRS has a legitimate OIC program that lets you settle your tax debt for less than the full amount. Scammers will impersonate IRS agents and offer assistance with filing an OIC. They'll charge you hefty fees for a service they'll never provide and steal your personal information in the process. They can then use that info to fuel their next scam against you.
• Fraudulent penalties: Scammers can claim that you owe high penalties to the IRS. They'll leverage the usual threats (arrest, seizure of assets. etc.) to get you to comply. They can also offer assistance (that you'll never get) in exchange for money. If you accept their "help," you'll also share private info they can use against you later.
• False tax preparers: "Ghost preparers" will promise huge refunds and other too-good-to-be-true hooks. They'll charge you a fee if you hire them and won't provide any help in return. They can also file your tax returns with false information and cause trouble with the IRS.
• Charity scams: Scammers even impersonate legitimate charity foundations. They are more active during tax season because charity contributions are tax deductible.

What are the warning signs of a successful tax scam

Learning to recognize a tax scam is essential. Here are the most common red flags to watch out for.

• Unrecognized financial transactions: Suspicious withdrawals and charges are strong indicators of a scam.
• Unusual activity on your credit report: You should check your credit report regularly. Account status changes, unusual transactions, inquiries from unfamiliar creditors, and new credit accounts indicate identity theft.
• Unknown tax returns: If the IRS has a tax return you didn’t file, a scammer has used your information to falsely claim a refund.
• Notice about a new account: If you get a notification about a new account you didn’t open, a scammer has used your information to open a false account in your name.
• Unsolicited tax transcript: You can order certain transcripts from the IRS, such as records of your tax returns or tax account. If you get these forms without ordering them, however, someone has misused your information with the IRS.

How to deal with a tax scammer

The best way to protect yourself from tax scams is to prevent them from happening in the first place. However, if you’ve already fallen victim to cybercriminals, follow these steps as soon as possible.

• Change your passwords: Identity thieves will try to lock you out of your accounts. You should change all relevant passwords quickly.
• Enable two-factor authentication: 2FA will protect your account by requiring an extra step for a successful login. For example, after you enter your password, you’ll also have to type in a code sent to your cell phone.
• Freeze your credit: Freezing your credit prevents scammers from opening new accounts using your credit history. Without checking your info, lenders can’t extend credit.
• Monitor your financial activity: You should monitor all your financial accounts carefully and immediately report fraudulent withdrawals or charges.
• Report the scam: You can report scams at phishing@irs.gov. If you've experienced financial loss, you can also file a report with the Treasury Inspector General Administration (TIGTA) and the Federal Trade Commission.
• Run a malware scan: Your computer and devices may have been compromised as part of the identity theft scam. We recommend using a program like Total AV to deal with any malware infections.
• Install security software: Identity theft prevention software can protect you against tax scammers and keep your private data from prying eyes. They also offer identity theft insurance, which can cover the expenses of dealing with cybercriminals.

What are the best identity theft prevention services

If you're worried about tax season scams, we recommend using a strong identity theft prevention service. Here are some of the best options out there.

• Aura offers scam-call protection to block IRS phishing calls and alerts you if your personal data has been compromised. It also offers 24/7 U.S.-based customer support and a variety of tax scam protection plans. The identity theft insurance goes up to $1 million.

  Get Aura | Read Our Aura Review

• Norton LifeLock offers a choice of identity theft protection plans for individuals and families. All plans include stolen funds reimbursement, credit monitoring, and identity theft alerts. LifeLock plans offer up to $3 million in coverage.

  Get Norton LifeLock | Read Our Norton LifeLock Review

• Identity Guard provides data breach notifications, dark web monitoring, and online security tools, including a password manager. Individual and family plans are available, and you'll benefit from U.S.-based customer service as well as $1 million in identity theft insurance coverage.

  Get Identity Guard | Read Our Identity Guard Review

Tax season scams FAQs

Bottom line

Successful tax scams can cost you a lot of money, damage your credit score, and even cause legal problems. The good news? Criminals can’t succeed without your help; if you refuse to click on malicious links or share your private data, these phishing attacks will fail.

That’s why it’s so important to learn how to recognize tax scams quickly. If you’ve fallen victim to a scam, however, we’ve outlined some essential steps to take as soon as possible. We also recommend adding an extra layer of security by using a strong identity theft prevention service.

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Author Details

Christy Rakoczy

About the Author

Christy Rakoczy, an experienced identity theft expert with over a decade of experience, specializes in cybersecurity issues and laws related to identity fraud. With a J.D. from UCLA’s School of Law and a background in teaching college courses on legal issues surrounding internet privacy, she offers valuable insights across a range of cybersecurity topics.