Signs of a Tax Scam: How to Avoid Becoming a Victim of Fraud

Tax-related fraud has become an increasingly prevalent issue, particularly during tax season when individuals and businesses are preparing their returns. As more people file taxes and seek refunds, scammers are looking for ways to exploit the situation. Tax scams can take many forms, from fake IRS calls and emails demanding immediate payments to fraudulent offers promising big refunds. These scams are often sophisticated, making it harder for people to spot them. With the rise in identity theft and digital fraud, tax season has unfortunately become a prime time for these criminal activities.

The tactics used by scammers are constantly evolving, which is why it’s more important than ever to stay vigilant. Whether you're an individual or a small business owner, recognizing the signs of a tax scam can help you protect your personal information, your finances, and your peace of mind. It’s essential to be aware that these scams can happen to anyone, and being prepared is the first step in avoiding becoming a victim.

This article aims to equip you with the knowledge and tools to recognize tax scams before they can cause harm. By understanding the common signs of a tax scam and learning how to verify legitimate communication from the IRS, you’ll be able to protect yourself from fraud. In this article, we’ll discuss practical, actionable tips for tax scam prevention that you can easily implement.

We’ll also highlight how the IRS communicates with taxpayers, helping you distinguish between legitimate and fraudulent requests. The goal is to provide clear steps that allow you to feel confident when dealing with any communication that claims to be related to your taxes. Whether you’re receiving unsolicited calls or emails or encountering suspicious offers, knowing how to respond can save you from falling victim to costly scams. By the end of this article, you’ll have the tools to safeguard your personal and financial information during tax season and beyond.

How the IRS Communicates

Understanding how the IRS communicates is crucial in identifying potential tax scams. Many scammers attempt to impersonate the IRS by calling, emailing, or texting taxpayers to demand immediate payment or personal information. The key to protecting yourself is knowing how the IRS really communicates. By being aware of the official communication methods used by the IRS, you can quickly spot a scam and avoid falling victim to fraud.

IRS Doesn’t Use Phone Calls or Emails for Unpaid Taxes

One of the most common tactics used by tax scammers is impersonating IRS agents and threatening taxpayers with legal action, arrest, or seizure of property unless an immediate payment is made. However, it’s important to know that the IRS will never initiate contact with you via phone or email to demand unpaid taxes or threaten immediate action. If you receive a phone call or an email claiming to be from the IRS that demands instant payment, it’s almost certainly a scam.

The IRS does not request personal information, such as your Social Security number, credit card number, or bank account information, through unsolicited emails or phone calls. Scammers often use scare tactics to pressure individuals into paying quickly, but the IRS operates differently. They will not ask for payment over the phone, nor will they request that you use gift cards, wire transfers, or prepaid debit cards to settle your tax debt. If you’re ever unsure whether a call or email is legitimate, it’s best to ignore it and report it to the IRS or your local authorities.

IRS Communication is Through Written Notices

The IRS typically communicates with taxpayers through official letters or notices sent by mail. If the IRS needs to notify you about a tax issue, such as unpaid taxes, refunds, or audits, they will always send a written notice to your address on file. These notices are official documents, often printed on IRS letterhead, and will include detailed information regarding the issue at hand. The letter will also include instructions on how to resolve the issue and a phone number or website where you can verify the legitimacy of the notice.

It’s important to carefully review any communication you receive in the mail from the IRS. If you receive a letter that you didn’t expect, or if something seems off about the notice (such as a strange return address or incorrect personal information), don’t panic. Instead, take the time to verify the legitimacy of the notice. You can do this by contacting the IRS directly through their official phone number (1-800-829-1040) or by visiting their official website. Avoid responding to unsolicited letters that claim to be from the IRS unless you’re certain they’re legitimate. The IRS also offers online tools, such as the IRS "Where's My Refund?" tool, which can help confirm the accuracy of tax-related communications.

By understanding these two key points about IRS communication—never receiving payment demands via phone or email, and always receiving written notices for tax matters—you can confidently identify potential scams and protect yourself from fraud.

Verifying the Legitimacy of Communication

One of the most important steps in protecting yourself from tax scams is to verify the legitimacy of any communication you receive. Scammers often create fake messages that look convincing, and it can be hard to tell what’s real and what’s not. Fortunately, there are several ways to confirm whether the IRS is reaching out to you, so you can avoid falling victim to fraud.

Contact the IRS Directly

If you receive a suspicious call, email, or letter claiming to be from the IRS, the best course of action is to contact the IRS directly through their official channels. Scammers rely on creating a sense of urgency and panic, hoping that you’ll act impulsively. To protect yourself, always verify any communication by reaching out to the IRS yourself. Here’s how you can do that safely:

• Call the IRS: The IRS has a dedicated number for taxpayers to inquire about issues or verify communication: 1-800-829-1040. If you’re unsure about a letter or phone call you received, you can call this number and ask whether there is an issue with your taxes.

  • Be prepared for wait times, especially during tax season.

  • Do not call any number provided in unsolicited emails or phone calls, as these may be part of the scam.

• Visit the Official IRS Website: The IRS website (www.irs.gov) is the best place to find official contact information. You can check the status of your taxes, see the latest updates, or even use the contact forms provided for specific inquiries.

  • Make sure you are on the official IRS website to avoid phishing scams that mimic the official site.

• Use the Taxpayer Advocate Service: If you feel overwhelmed or need help dealing with IRS issues, the Taxpayer Advocate Service (TAS) can assist you. They are an independent office within the IRS dedicated to helping taxpayers resolve their problems with the agency.

  • Contact them at 1-877-777-4778 for assistance.

By taking the time to directly reach out to the IRS, you can ensure that any communication you received is legitimate and avoid falling for fraudulent schemes.

Using Online Tools to Check Returns and Refunds

In addition to contacting the IRS directly, there are several online tools provided by the IRS that can help you verify your tax-related information. These tools are easy to use and allow you to quickly confirm whether your return, refund, or tax issue is genuine. Here are a few helpful tools to check:

• Where’s My Refund?: The IRS offers a tool called "Where’s My Refund?" that allows you to track the status of your tax refund. It’s one of the best ways to check whether a notice you received about a refund or tax issue is legitimate.

  • How it works: You’ll need to provide your Social Security number, filing status, and the exact refund amount you expect to receive. The tool will show you where your refund stands, including if it has been processed or if additional steps are required.

  • Available on the IRS website or through the IRS2Go mobile app.

• IRS Online Account: You can set up an online account with the IRS to access detailed information about your tax account. This includes information about your past returns, payments, and any issues the IRS may have with your taxes.

  • Visit the IRS website and create an account to check your tax balance, payments, and history.

  • It’s a secure way to view up-to-date information without relying on third-party sources.

• IRS Interactive Tax Assistant (ITA): This tool provides answers to common tax questions, helping you determine whether a letter or message from the IRS is legitimate.

  • It asks a series of questions about your situation and provides an instant answer based on IRS guidelines.

  • This tool can help you understand common tax-related issues and verify whether you’re being contacted for legitimate reasons.

• Check for Notices: If the IRS claims to have sent you a notice, you can check the status of any official IRS letters by logging into your account or using the "Where’s My Refund?" tool.

  • Keep in mind that the IRS does not always send an immediate notice for every action they take, so use these tools to verify if one has been issued.

Using these online tools can give you peace of mind by allowing you to verify tax-related communications directly with the IRS. It’s always safer to double-check rather than acting on an uncertain or suspicious request.

Protecting Yourself from Tax Scams

Tax scams are designed to trick individuals into revealing sensitive personal information, which is then used for fraudulent activities. Protecting your personal and financial details is crucial in avoiding tax scams. By taking proactive steps, you can significantly reduce your risk of becoming a victim. This section will provide valuable tips on how to safeguard your information and choose trusted professionals to handle your taxes.

Never Share Personal Information Over Unsolicited Calls or Messages

One of the most important rules to follow when it comes to avoiding tax scams is never to share your personal information—especially sensitive details like your Social Security number, bank account information, or credit card numbers—over unsolicited phone calls, emails, or text messages. Scammers are experts at creating fake scenarios that make it seem like you need to provide this information quickly. However, the moment you share such data, you risk identity theft and financial loss. Here’s how to protect yourself:

Avoid Giving Out Personal Information: The IRS or legitimate tax professionals will never ask you for your personal information via unsolicited emails, phone calls, or text messages. If someone reaches out to you and asks for sensitive data, hang up or ignore the message. Do not respond or engage with the sender in any way.

Scam Tactics to Watch Out For: Scammers may claim that you owe taxes and threaten immediate action, such as arrest or wage garnishment if you don’t pay right away. These threats are often designed to pressure you into providing your financial information. Another common tactic is pretending to be offering a "refund" and asking for your bank account details to deposit the money.

Don’t Trust Caller ID: Scammers often use technology to fake the appearance of an IRS phone number (also known as "caller ID spoofing"). Just because the number looks official doesn’t mean it’s legitimate. If in doubt, hang up and call the IRS at their official number, 1-800-829-1040, to verify.

Use Strong Passwords: Protect your online accounts and financial information by using strong, unique passwords. Avoid using easily guessable information like your birthdate or names of family members. Implement multi-factor authentication wherever possible, which adds an extra layer of protection to your online accounts.

By sticking to these practices and refusing to share personal information with unknown sources, you significantly reduce the risk of falling victim to identity theft and fraud.

Choose a Certified Tax Professional

Working with a qualified and certified tax professional is one of the best ways to avoid falling for scams, especially during tax season. Certified tax professionals, such as Certified Public Accountants (CPAs), Enrolled Agents (EAs), and tax attorneys, are licensed and regulated by the IRS, ensuring they have the expertise and authority to help you with your tax filings. Here’s why choosing a certified professional matters:

Credentials Matter: Certified tax professionals have undergone rigorous training and certification processes. CPAs, EAs, and tax attorneys are required to maintain their credentials by completing continuing education courses to stay up to date with tax laws. Choosing someone with the appropriate qualifications ensures that your tax returns are filed correctly and that you're not taken advantage of by fraudulent preparers.

Know Your Tax Preparer: Before hiring a tax preparer, take the time to research their credentials. Verify their license and look for any complaints or disciplinary actions. The IRS has a searchable database of enrolled agents, so you can confirm if a tax preparer is authorized to represent you before the IRS.

Beware of "Too Good to Be True" Promises: If a tax professional offers unusually high refund promises or guarantees a specific refund amount, be cautious. These kinds of offers are often a red flag of potential fraud. Reputable professionals will never guarantee a refund or promise specific numbers before reviewing your documents thoroughly. Instead, they will explain the refund process and offer realistic expectations.

Review Your Tax Returns: A professional tax preparer should involve you in the process and explain the tax filings to ensure you understand what is being filed on your behalf. Always review your return before signing it. If a tax preparer is unwilling to answer questions or provide transparency, it’s time to find someone else.

Avoid "Ghost Preparers": A "ghost preparer" is someone who prepares your taxes but doesn’t sign the return. If a tax preparer refuses to sign your return or asks for payment in cash without providing a receipt, this is a significant red flag. Always choose professionals who are transparent about their credentials, fees, and services.

By working with a certified professional, you not only gain peace of mind that your taxes are being handled properly, but you also ensure that you are protected from scams that might involve fraudulent tax filings, inflated refunds, or misreporting of information.

Digital Security and Caution Against Too-Good-to-Be-True Offers

As tax scams become more sophisticated, it's crucial to secure your devices and remain cautious about unrealistic offers that may seem too good to be true. This section will provide practical tips for protecting your personal information and avoiding fraudulent schemes.

Securing Your Devices

To protect yourself from scammers, securing your devices is essential. Here are some simple ways to keep your personal information safe:

• Use Strong Passwords: Create unique, complex passwords with a mix of letters, numbers, and symbols. A password manager can help you keep track of them.

• Enable Multi-Factor Authentication: Add an extra layer of security by requiring a second verification step, such as a code sent to your phone.

• Keep Software Updated: Regular updates to your software help protect against known vulnerabilities. Turn on automatic updates for your devices and apps.

• Use Encryption: Encrypt your devices and data to make it unreadable to unauthorized users, especially if your device is lost or stolen.

• Be Careful on Public Wi-Fi: Avoid accessing sensitive accounts over public Wi-Fi. Use a VPN to protect your internet traffic when needed.

Taking these steps helps prevent unauthorized access and keeps your data secure from digital thieves.

Beware of Unrealistic Tax Refund Promises

Be cautious of tax scams that promise unusually high refunds or offer quick results. These are often designed to lure you into providing personal information or paying hidden fees.

• Avoid "Big Refund" Guarantees: No legitimate tax professional can promise an exact refund amount without reviewing your documents. Be skeptical of anyone who does.

• Watch for Aggressive Marketing: Scammers may use high-pressure tactics to rush you into decisions. Always take time to research and verify the service.

• Beware of Hidden Fees: Some tax services offer "free" preparation but charge you hidden fees later. Always read the fine print.

• Skip Refund Anticipation Loans: These loans, which promise early refunds, often come with high fees and interest. It's better to wait for your actual refund from the IRS.

• Verify Credentials: Always choose a certified tax professional, such as a CPA or enrolled agent. Ensure they have the proper qualifications and offer transparent pricing.

By staying vigilant and securing your devices, you can avoid falling for scams that promise big refunds or quick results.

Bottom Line

Staying vigilant is crucial to protecting yourself from tax scams. By recognizing the signs of a scam, such as unsolicited calls, emails, or unrealistic refund promises, you can avoid falling victim to fraud. Always verify communication with the IRS directly through official channels, be cautious about sharing personal information, and choose certified tax professionals for your tax needs. Additionally, securing your digital devices and being mindful of offers that seem too good to be true will further help safeguard your personal and financial data. To better prepare for tax season and protect yourself from scams, download our comprehensive Tax Kit, which provides helpful tools and guidance to ensure you’re ready and secure.