How to Spot and Avoid Tax Scams

Publication date: January 25, 2024

Reading time:  7 minutes

Tax season is a stressful time for many, and scammers are well aware of it. Each year, unsuspecting individuals fall victim to tax scams, losing their hard-earned money and personal information. It is important to understand what tax scams are, how to spot them, and most importantly, how to protect yourself from falling prey to these fraudulent schemes.

This article is specific to the United States and the Internal Revenue Service (IRS). However, similar scam tactics are used in other countries as well, and the advice of what to watch for can be applied as well. 

NOTE: eRank is not a legal or tax official. This article is meant for informational purposes only. It is always best to check with your legal or tax representative for specific questions and advice.

What Are IRS Scams?

IRS scams are fraudulent activities conducted by criminals who impersonate the IRS or use deceptive tactics to steal money or sensitive personal information from taxpayers. These scams often occur throughout the year but tend to peak during tax season when individuals are focused on their financial matters.

Common Types of IRS Scams

The types of actual scams vary from year to year, and unfortunately, there are always new ones that emerge. However, the basic concept behind the scams are somewhat similar. Scammers have evaded all contact methods—phone, email, text, social media, and postal mail. Be aware the majority of the time, the IRS will only contact taxpayers via official first class postal mail. The IRS will never contact you by email, text, or social media.

☎️ Phone Scams

In this type of scam, fraudsters call individuals and impersonate IRS agents. They may use scare tactics, such as threatening arrest or legal action, to pressure victims into making immediate payments.

📧 Email or Phishing Scams

Scammers send emails that appear to be from the IRS, requesting personal information or payment for taxes owed. These emails often contain links that lead to fake websites designed to steal sensitive data.

🪪 Identity Theft

Criminals may steal an individual’s Social Security Number (SSN) or other personal information and then file fraudulent tax returns to claim refunds.

📝 Fake Tax Preparation Services

Some scammers pose as tax professionals and promise large refunds or offer tax services at unusually low rates. They may take your money and disappear, leaving you with unfiled taxes.

💸 Tax Relief Scams

Fraudsters may promise to settle your tax debt for a fraction of the amount owed. They often charge hefty upfront fees and fail to deliver on their promises.

How to Spot IRS Scams

Recognizing IRS scams is crucial for protecting yourself and your finances. Here are some common signs of IRS scams to be on the lookout for.

🤬 Threatening Language

Scammers often use aggressive and threatening language. They may claim you owe back taxes and threaten legal action, arrest, or deportation. The IRS will never make threats to a taxpayer. Official legal action will be processed through the court system.

💰 Demands for Immediate Payment

The IRS typically communicates through official correspondence and will not demand immediate payment over the phone or via email. The IRS offers payment plans for most taxpayers for taxes due and prefers to work with taxpayers to get due amounts paid. For more information about payment plans and options, view THIS TOPIC from the IRS’s official website. 

🪪 Requests for Personal Information

Be cautious of any request for personal information such as SSN, bank account details, or passwords. The IRS will not ask for this information through unsolicited communications. 

💳 Unusual Payment Methods

Scammers may request payment via wire transfer, prepaid debit cards, or cryptocurrency. These methods are not typical for IRS payments. Common payment types that are used by the IRS are:

  • Direct debit from your bank account
  • Payroll deduction from your employer
  • Payment by EFTPS (the IRS payment site)
  • Payment by credit card or debit card via phone or Internet
  • Payment via check or money order

A complete list of payment options can be found on the IRS’s WEBSITE.

🔎 Suspicious Email Addresses or Phone Numbers

Carefully check email addresses and phone numbers. Scammers often use email addresses with misspelled domains or caller IDs that appear unrelated to the IRS. If you receive an email or letter, look at the language closely. Misspellings and awkward word phrasing is often the best clue to the correspondence being spam.

How to Protect Yourself

Due diligence is necessary to protect yourself from these scammers. Monitor your personal accounts regularly and be cautious about just “throwing out” paperwork that may contain personal information. It’s always best to shred or otherwise destroy any documents that contain any personal identifiers such as your SSN, bank account information, or passwords.

In addition, here are some additional steps to take to protect yourself from IRS tax scams.

📱 Verify Caller Identity

If you receive a call from someone claiming to be from the IRS, ask for their name and a call-back number. Then verify their identity by calling the official IRS helpline at 800-366-4484. 

✖️ Ignore Unsolicited Emails

Do not click on links or download attachments from unsolicited emails claiming to be from the IRS. The IRS primarily communicates through the US Postal Service. Again, they will not contact you via email, text, or social media.

🧑‍💼 Use Trusted Tax Professionals

When seeking tax assistance, use certified tax professionals or well-established tax preparation services. Research their credentials and read reviews if possible.

🪪 Protect Personal Information

Safeguard your personal information, including your SSN and use strong, unique passwords for your financial accounts, changing them regularly. Do not use the same password for multiple accounts. 

🧑‍💻 Stay Informed

Keep up to date with the latest IRS scam alerts and news. The IRS frequently publishes information about current scams on their WEBSITE.

IRS scams are a serious threat to individuals’ financial well-being and personal security. By being aware of common scam tactics and staying vigilant, you can protect yourself from falling victim to these fraudulent schemes. Remember that the IRS will never demand immediate payment over the phone, threaten you with arrest, or request personal information through unsolicited emails. If you suspect an IRS scam, report it to the IRS and the Federal Trade Commission (FTC) immediately. Your vigilance can help prevent financial losses and contribute to the fight against tax-related fraud.

NOTE: eRank is not a legal or tax official. This article is meant for informational purposes only. It is always best to check with your legal or tax representative for specific questions and advice.