Have you ever gotten a phone call with a “Likely Spam” or “Potential Fraud” label? What about an email warning about a possible malicious attachment? While technology is getting better at detecting suspicious activity, it’s still possible for scammers to sneak through undetected.
These dangers are no different during tax season. It’s important to stay informed on the latest schemes and remain vigilant as these scams become more common and sophisticated.
Read more: How Ally Bank keeps your money safe
Understanding tax scams
Recognizing common scams and red flags can help you stay calm if a cybercriminal tries to con you.
Common types of tax scams
Billions of dollars are lost each year to tax-fraud schemes. Most of these losses occur when scammers use stolen names, birth dates and Social Security numbers to file fraudulent tax returns and claim others' refunds for themselves.
Most of these losses occur when scammers use stolen names, birth dates and Social Security numbers to file fraudulent tax returns and claim others' refunds for themselves.
Fraudsters execute their schemes in a variety of ways:
Phishing emails: Fraudulent emails that appear to come from the IRS or legitimate institutions asking for specific personal information or tricking you into clicking on a malicious link
Phone scams: Con artists impersonating IRS officials demanding immediate payment. This could be via a phone call or text message, and they could even request you pay them through unusual methods like a mobile payment app.
Identity theft: Using stolen personal information to file fraudulent tax returns
Artificial intelligence (AI) scams: AI allows criminals to complete cons faster and with more sophisticated techniques to defeat IRS and accounting firm security measures.
Tax return preparer fraud: Fraudulent tax preparers might claim improper credits, deductions or exemptions to illegally boost the refund amount.
Inflated refund claims: Schemers will promise inflated refunds to entice victims to file their tax returns with them.
Fake charities: Fraudulent nonprofits — many of which pop up following natural disasters — deceive taxpayers by taking advantage of your generous nature and steal your money and potentially, your identity.
Recognize the red flags
Fraudsters typically employ similar tactics to carry out their tax scams. Knowing and recognizing these common signs can help you stay protected:
Unsolicited emails, phone calls and other communications claiming to be from the IRS
Requests for payment via gift cards, wire transfers or other unusual methods like mobile payment apps
Threats — such as arrest or deportation — or urgent demands for immediate action
Protect yourself against tax scams
Filing taxes can be stressful enough without having to worry about scams. But, since tax fraud is becoming more common, the following actions can help you to protect yourself.
Verify communications
If you receive phone calls, emails, texts or other communications asking for sensitive information, contact the IRS directly using official channels to verify. And always be skeptical of unsolicited emails, calls and texts requesting personal information.
Safeguard personal information
A scammer doesn’t have to contact you to steal your information. Protect your accounts with strong, unique passwords, multi-factor authentication and regularly monitor financial statements and credit reports for suspicious activity.
Stay informed
Keeping up to date on the latest tax scam alerts from the IRS website can help you stay aware of new tactics and schemes.
What to do if you encounter a tax scam
Even the most vigilant taxpayers can fall victim to a scam. If your personal or financial information is compromised or you suspect someone isn’t complying with tax law, here’s how to act swiftly.
Report the scam
As soon as the fraud comes across your phone, email or other account, let the proper authorities know. For phishing emails, contact phishing@irs.gov. For phone scams, use the IRS Impersonation Scam Reporting form.
Take immediate action
If your personal or financial information is compromised, place a fraud alert on your credit report, consider freezing your credit and file a complaint with the Federal Trade Commission (FTC).
Stay protected from tax scams
While there’s no guaranteed way to stop tax scams, these steps can help you be better protected. As tax season rolls around, stay informed, prepared and vigilant.
