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It's that time of year again, when you gather up your W2s, 1099s, and other documents and start to tally up how much you owe, or how much of a refund you'll be getting from the Internal Revenue Service. It's also the time when criminals do everything they can to take advantage of you.
While they persist year-round, IRS scams peak during the tax-filing season. Steve Weisman, an attorney who operates the blog Scamicide, says scammers often target victims by posing as IRS agents.
"Scammers can use a technique called 'spoofing' to manipulate your caller ID so that it appears as if the call is coming from the IRS," Weisman explains.
Knowledge is the best tool you can use to protect yourself against falling victim to an IRS scam. These are among the most common:
According to the Federal Trade Commission (FTC), hundreds of millions of dollars are lost to gift card scams annually. And since most people don't report fraud, this number is likely only a fraction of the total damage done.
"Gift cards are a favorite method of payment for scammers because they are easy to turn into cash anonymously," Weisman says.
Here's how the gift card scam works:
Scammers contact you claiming to work for a well-known business or government agency. For instance, they may claim to work for the IRS and say you owe back taxes and need to pay a penalty fee.
They say if you don't pay this fee, something terrible will happen, and the only way to avoid it is to pay the caller in gift cards. From there, the scammer will send you to very specific stores to buy gift cards. Target, Walmart, Walgreens, and CVS are popular choices. Once you've purchased the cards, the caller will ask for the gift card numbers and PINs.
Another common scam is when someone contacts you pretending to be an IRS agent. The phone call may be about a real or pretend tax payment, and the caller will threaten you with arrest if you don't pay them immediately.
The scammer often goes to great lengths to come across as legitimate, and can mask their caller ID to make it seem like an IRS office. The caller may even give you a fake name or phony IRS badge number.
Weisman says that these calls are almost never legitimate because "the IRS never initiates contact with taxpayers through phone calls, emails or text messages."
The IRS usually contacts consumers by mail, although they will occasionally reach out by phone about an overdue tax bill. But the IRS will never ask for credit or debit card numbers over the phone. The minute a so-called IRS agent asks you for personal information, you know it's a scam.
The IRS says bogus charities are always a problem. Taxpayers who give to a charity may be able to claim deduct the amount on their federal tax returns. However, they must donate to a qualified charity to get a deduction.
During tax season, you might receive a call from someone claiming to be from a charitable organization seeking a donation, stressing that you can receive a tax benefit from doing so. The IRS warns that if someone is pressuring you to donate, it's probably a scam.
"A legitimate charity will be happy to get a donation at any time, so there's no rush," the agency says. "Donors are encouraged to take time to do the research."
If you receive such a call, ask for the charity's exact name, web address and mailing address, so you can confirm them later before giving any money. Remember that some scammers use names that sound like large well-known charities to confuse people. Also keep in mind that scammers will often ask for you to make a donation by giving numbers from a gift card or by wiring money.
Another IRS scam to watch out for is a ghost preparer. This is someone who prepares your tax returns but doesn't sign it or include any details identifying themself. Weisman says that these tax preparers attempt to defraud both the IRS and taxpayers.
"Criminal tax preparers also often steal the personal information provided by their clients to make them victims of identity theft," he explains.
This person will usually print the tax return off and ask you to sign it and mail it to the IRS. If they complete an e-filed tax return, they'll often refuse to sign the return digitally.
Anyone paid to prepare a tax return is legally required to have a Prepared Tax Identification Number (PTIN) and include it on the return. Refusing to sign a prepared tax return is a red flag that someone is trying to scam you.
Ghost preparers will often require payment in cash and refuse to provide you with a receipt. They may also invent income so you'll qualify for additional tax credits or claim fake deductions to boost your tax return. And they'll direct any refund you receive to be deposited into their bank account, not yours.
The best way to avoid this scam is by hiring a legitimate tax preparer from the start, according to Weisman.
"The IRS offers a free directory of tax preparers in your area who currently hold professional credentials recognized by the IRS, he says."
Refund and recovery scams are especially painful because they target individuals who have already been victims of a scam. In this scam, someone contacts you promising to help you recoup the money you lost … but you have to pay them first.
Weisman says that scammers keep and share lists of people who have already been tricked by scams. This list includes information like your name, address, the type of scam used, and how much money you lost.
So when the scammer contacts you, they're familiar with your situation and make you think you can trust them. Once you pay the money, that person disappears, and you're out even more money.
If you've been the victim of an IRS scam, the first step you should take is to report it. You can report tax scams to the IRS and file a complaint with the FTC. Weisman says the FTC and the Justice Department will assist you in trying to get your money back from a scammer.
But he also warns: "No legitimate law enforcement agency or governmental agency requires any payment to assist with getting money back from a scammer."
