Unmasking the threat: A deep dive into IRS scams

What are IRS scams?

“IRS scams” is pretty self-explanatory term, but it might be more appropriate to call them tax scams. No matter how you feel about the IRS, they aren’t out to trick you. But, in general, these are scams that focus on a person’s taxes, including filings and refunds. Just like other scams, the ultimate goal of IRS scams is to separate you from your hard-earned money.

None of us want to see our refund check go to someone else or a scammer to gain control and drain your checking account. Let’s explore different types of IRS scams to help prevent you from becoming a victim.

How to identify IRS scams

To avoid tax scams, you need to be able to identify them. Here are some red flags to watch for:

1. How are they initiating contact? The IRS initiates most contact through good ole snail mail and, according to their website, it will never initiate contact with taxpayers about a bill or refund via email, text, or social media.
2. If someone claiming to be the IRS hits you up on your favorite social media platform saying you owe money or sends you an email asking you to click a link to get your refund, you can bet it’s a scam.
3. Are they asking for payment with a gift or debit card? The IRS doesn’t accept your local grocery store gift card as payment. I once received a call from the “IRS” stating that I owed money and they were sending police to my door if I didn’t pay with a particular type of department store card. I knew it was a scam from the start, but does everyone? Probably not, because if it didn’t work, scammers wouldn’t continue to use that method.
4. Are they resorting to threats or bullying? A communication that’s threatening or bullying you into paying a tax bill is probably a scam. The IRS is a federal agency and doesn’t need to bully or threaten you to get its money. It has other legal means to get what you might owe, such as wage garnishment or asset seizure.
5. Are they not giving you a chance to appeal? That’s red flag. The IRS gives you a chance to address or appeal its tax ruling. They’ll advise you of your rights as a taxpayer and never threaten to withhold them from you.

It’s easy to panic if you get a communication allegedly from the IRS about your taxes – nobody likes paying taxes or dealing with tax forms. But don’t be so alarmed that you react without carefully considering these red flags to help you determine if it’s a real or a fake IRS communication.

Now that we’ve looked at some red flags, let’s look at 6 scams in more detail and see if you can spot the red flags.

Types of IRS scams

Many scams are out there, but each year the IRS publishes a long list of what they call the “Dirty Dozen Opens a new window.”‍ ‍ ^{See note 1} While the Dirty Dozen represents the worst of the worst, here are some common tax scams to know and avoid.

1. Phishing

2. Verification requests

3. Phone scams

4. Inflated refund claims

5. Fake charities

6. Identity theft

1. Phishing
Scammers use unsolicited emails and fake websites to lure potential victims into sharing personal information that will be used to commit identity theft and fraud. Be leery of unexpected emails from the IRS promising refunds or threatening to collect. Which red flag is presented here?

2. Verification requests
Don't be fooled by a fake IRS letter asking you to verify your W-2 or personal information. Some scam emails may ask you to upload a picture of your forms. The only time that the IRS would request ID verification would be if they were concerned about a suspicious tax return using a valid taxpayer’s name or Social Security number. But what would a real IRS letter look like? You’ll likely receive a Letter 507IC — check the upper corner for the number to rule out fake IRS letters — in the mail asking you to verify your identity using the Identity Verification Service Opens new window.‍ ‍ ^{See note 1}

3. Phone scams
Scammers impersonating IRS agents may make aggressive or threatening calls to demand money or offer a “refund.” Sometimes they send IRS scam letters or even alter their caller ID information to appear as if they're calling from an IRS office. But that's not how the IRS does business, according to officials. Which red flag is highlighted here? Remember, the first IRS contact with taxpayers is usually via mail with an official letter.

4. Inflated refund claims
Beware of tax preparers who ask you to sign a blank tax return, promise big refunds before looking at your records or charge fees based on a percentage of your refund. These scammers may file a false return in your name and take your refund. The IRS offers tips for choosing a preparerOpens new window.‍ ‍ ^{See note 1}

5. Fake charities
After disasters, it's common for scammers to impersonate charities. Some even contact victims, claiming to be with the IRS. These groups often have names similar to legitimate organizations. Don't give out your personal financial information or your Social Security number. And don't give or send cash. You can look up legitimate charities through the IRS Opens new window.‍ ‍ ^{See note 1}

6. Identity theft
One of the most common identity theft scams involves filing tax returns using stolen Social Security numbers. Protect your personal data, check your credit report annually and review your Social Security Administration earnings statement each year to make sure you haven't been targeted. But a tax scam isn’t the only way scammers commit identity theft. Check out this article we’ve devoted to helping protect yourself from identity theft.

Tips for avoiding IRS scams

Once you’ve identified the red flags, here are some additional ways to protect yourself and your personal information. Scammers are working hard to get your information and your money, so you need to work harder to protect yourself.

Educating yourself on IRS procedures

Know IRS procedures so that you can notice if something is out of place. For example, knowing how the IRS communicates with you, the timelines for filing taxes, and the audit process can help you avoid fake IRS letters and scams, even if they aren’t the specific ones we’ve mentioned.

Utilizing security measures

Another method to protect yourself from IRS scams is to use smart digital citizenship or safe online practices. Always check the sender when you receive communications, no matter how legitimate the email looks. The “from” might look like an IRS.gov email, but when you expand the field, the actual address is something like ppp423432@gmail.com. Scammers can also spoof their caller ID, so just because the call looks like it’s coming from the IRS doesn’t mean it is. If in doubt, hang up and call back at a verified number, like the agency’s 1-800 number.

Also, ask yourself if the data being request is something the IRS should already know. If you get an email asking you to verify your Social Security number and W-2 information, but you know you filed those documents with your tax return, don’t click the link.

In addition, use other safe digital practices like two-factor authentication on website that you use to prepare and transmit tax returns. Keep documents safe and if they’re no longer needed, shred them versus simply throwing them away.

Taking action against scammers

If we all work together, we can help reduce the effectiveness of these scammers. The first thing you can do is share with your friends and family anything you might have learned from this article. It might help them avoid becoming a victim.

Also, take some time to review the most current IRS scams or the “Dirty Dozen” list. While it might not keep your attention as well as the most recent novel you’re reading, it’ll be worth your time if you can protect yourself from even one scam.

Reporting IRS Scams

If you get targeted by a scammer – or think you’ve fallen victim to a scam – take action and report it. Check out this IRS site on how to report tax scams Opens new window.‍ ‍ ^{See note 1}

The good news is that armed with this information, you can reduce your chances of being a victim. So now that you’ve protected yourself and you get your well-earned refund instead of the scammer, the question becomes, what do you do with it? How can you use it to better your financial goals? Check out this article that gives ideas on what to do if you get a refund.