Tax season is a stressful time. There are so many questions and unknowns, and you’re looking for help from anyone. Scammers know that this is the case, so they will try a tax scam to steal your information or money. In this guide, we’ll tell you 14 tax scams, how to protect yourself, and how to report a scam.
What is a tax scam?
A tax scam is a seasonal scam. Unlike pumpkin spice coffee, this seasonal trend isn’t enjoyable at all. Scammers are looking to steal your personal information by posing as an IRS agent or tax preparer, tricking you with a tax-related call or email, or hacking your computer.
Many people are confused by taxes, and many individuals and businesses don’t know what the IRS can and can’t do. Scammers know this and use tax season to roll out seasonal scams to take your money.
The high stakes of a tax scam
Just a little information can do a lot of damage. This is especially true for people who own a small business. Your employees can give a scammer information that levels your business. The stakes are higher: if you slip up, it’s not just your finances on the line, but your company’s as well.
One small business tip to take into 2021 should include not losing a ton of money through scams. This frightening scenario is exactly why you need to take tax scams seriously.
14 Tax scams
A good way to learn about a tax scam is to review some examples. In this section, we’ll tell you about 14 common tax scams. If you recognize these in real life, you might want to contact the IRS and report a scam.
Phishing is a general term that’s used in the world of cybersecurity. It’s when one party tries to take information from someone else through trickery. Technically you’re willingly giving the information, but the recipient isn’t who they claim to be.
In a tax scam, you’ll see a lot of different versions of phishing. Someone will pretend to be a tax preparer or the IRS, and they’ll get personal information from you. It can be done over the phone, via text or email, or when you click a link.
With your information, scammers will do several malicious things. Notably, they’ll open credit cards or get loans in your name, ruining your credit score as well as hurting you financially. If they get your banking info, they’ll clean out your accounts and take all your money. This is one business expense that you can’t afford to pay.
If you can avoid phishing, you’ll steer clear of a majority of tax scams.
Another genre of a tax scam is ransomware, a cybersecurity term that refers to when someone takes forcible control of your computer and ransoms you. They’ll lock your PC and tell you that the only way they’ll unlock it is if you pay them a certain amount of money.
If this is done in your small business, it can spread across your network and affect every computer in your office.
Ransomware can be software loaded onto your computer, or it can be installed when someone has access to your PC. Nothing guarantees that the ransomware will be taken away after paying the fee, which makes this especially dangerous.
Beware: Ransomware may not always be tax-related but there’s never any guarantee that your computer will be released even if you pay the ransom.
If someone promises easy money through some type of tax loophole, you should be very skeptical. The scammer might say that they know some unknown way to get you a ton of money back from the IRS. There’s no secret loophole that will get you a ton of money. The only way that’s possible is through tax fraud, which is illegal. There’s no lottery or sweepstakes in taxes that gives you money.
They will instead take your information or money. They might use your information to take out a loan which can hurt your chances of getting a business loan later. Remember: if something seems too good to be true, it probably is.
The goal of identity theft in a tax scam is to take enough information to file taxes fraudulently with your name. The scammer will put in fake income information to make sure they get plenty of money back, and they’ll send the money to their account.
This is bad on two levels. First, you won’t be able to file your taxes since someone with your social security number already did. Secondly, you could get in trouble with the IRS if the identity thief performs tax fraud.
It’s very important to keep your information safe during tax season.
Update your tax information
Someone not affiliated with the IRS will reach out to you and tell you that your tax information needs to be updated. They might claim that you’ll need to re-submit your information since your business did better this year.
They’ll either ask for the information over the phone or send a fake link to your email for you to update your info. When you give the information, it goes right to the scammer.
Your account got locked
One fear tactic is to tell you that your account will be restricted or locked if you can’t verify who you are. This might seem like a very normal safety feature, but it’s a common tactic scammers use.
Often, there’s a strict deadline associated with this kind of scam. They might say that you have 24 hours to provide the information before your account gets permanently closed and you can’t file business taxes anymore.
The IRS won’t close your account, so you don’t need to worry about this. Just ignore the message.
An unexpected “refund”
One of the oldest scams is to pretend to give someone money in exchange for personal info or some upfront money. In this tax scam, the scammer will say that you unlocked a huge refund. They’ll need you to either verify who you are or send over money to open the account.
In the first case, they’ll just take your information and run. In the second case, they’ll take your money and disappear. Either way, it’s a scam. Like promises of tax loopholes or lotteries, there’s no way to unlock an extra refund from the IRS.
If you receive a call from someone saying they’re from the IRS, don’t fall for this tax scam. Instead, hang up and call the IRS directly.
IRS impersonator phone call
One of the most common scams is someone pretending to work for the IRS. The information they’ll ask you for will vary from scammer to scammer, but they always have a nefarious reason.
A scammer can spoof the phone number of the IRS. Spoofing is when someone makes a call, but the recipient of the call sees a different phone number or caller ID on their screen. This means that the caller ID on your phone might even say IRS, but the caller does not work for them.
The caller will act hastily, demand information, threaten you, and act aggressively. This is an old technique built around our deference to authority. Don’t fall for the trap.
If you doubt the legitimacy, hang up and call back the IRS directly by typing in the number on your phone. A spoofed number won’t be able to receive calls through the correct phone number, so you should be safe.
Asks you to pay them with prepaid cards, gift cards, or a wire transfer
The IRS will never ask you to pay them with gift cards, prepaid cards, or a wire transfer. This is a well-known tactic that scammers do to get quick money that can’t be refunded. They might also ask for access to your business bank account, which is a big red flag.
Threats to cancel your social security
Another example of a threat is when the scammer says that they’ll get rid of your social security if you don’t comply. No IRS agent has that level of power, so you can rest assured that this is a scammer. A tax fraud scam call is all about scaring you into making a rash decision.
This comes up a lot, but the IRS won’t text you about important tax information. Scammers can use a texting app to send out their message without it being traced back to them. This makes it harder to find and punish the parties responsible. It also makes it harder for you to verify their identity.
Social media messages
The IRS won’t message you on social media. Not only is this an unprofessional place to talk about important tax information, but it’s also unsecured. No matter how believable the account looks, never respond to these messages. Don’t click any links they attach, just block their account.
“IRS agents” showing up in-person
One of the scariest scams is an “IRS agent” showing up in-person at your business or home. Get away from the situation as quickly and safely as possible and immediately call the police. Be very careful because you’re not sure what the scammer intends to do.
Scam from fake tech support
There are fake tech support numbers all over the internet, and sometimes they’ll call you. They will pretend to be able to help with any issues you’re having with your computer. They might also pose as the IT department of a tax filing software, here to help.
They will take control of your computer, lock it, steal your information, and take your money.
How to quickly spot a scam
Since there have been so many scams in the past, there’s a lot of data available. This data tells you the types of things to look for to help you quickly spot a scam.
- Doesn’t use your name. A scammer might refer to you as sir, ma’am, madam, or taxpayer. The IRS knows your full legal name, so why wouldn’t they use it? This is an indicator that it’s a scam message.
- There are typos. If you receive written content from someone claiming to be the IRS, check for typos or spelling issues. A lot of times the scammers are operating outside of the USA and English isn’t their first language. There might be typos and grammatical errors indicative of a non-native English speaker.
- There are links or attachments. Never click a link or attachment that you get in an email claiming to the IRS. You can navigate to the source on your own by typing it directly into your internet browser. Scammers will hide viruses in links and attachments that get downloaded onto your computer.
- They are overly threatening. Paying your taxes is definitely serious, but the IRS isn’t going to start threatening you over them. Scammers will use verbal and written threats to scare victims and make them act faster without thinking.
- You get a text, social media message, or strange email. If you didn’t specifically request an email, it’s probably fraudulent. Similarly, the IRS doesn’t have a Twitter page that they’ll DM people on, nor do they text taxpayers. These are tactics that scammers use. Even if it looks real, it’s probably fake.
- They want a lot of personal info. It doesn’t make sense why the IRS would call you to ask for all of your personal info. The IRS already knows who you are. Scammers are the only people who will reach out to you and demand all of your info. This could pertain to credit card numbers, business banking info, social security numbers, addresses, and your mom’s maiden name. The more info a scammer gets, the bigger the risk is for you.
Avoiding a tax scam
The best way to avoid a tax scam is to keep your guard up. Be very suspicious any time someone says they work for the IRS and need some tax info. The worst-case scenario is that an actual IRS agent has to spend more time convincing you.
Another good idea is to file early. This lessens the risk of a scammer filling out taxes using your info, and it takes away the credibility of scammers calling you asking for tax info after you’ve already filed.
Remember that the real IRS will send written notifications through the mail. If you’re in doubt over whether a message or call is legitimate, ask them to send you the necessary information through the mail. A scammer will try to talk you out of this, while a legitimate IRS agent can easily mail you something.
How to report a tax scam
If you get a message that seems suspicious, don’t click any links and don’t fully open the email. You can forward the email to [email protected] with a subject line indicating you received a scam email. Through Gmail or Outlook, you can also report the message for phishing and block the sender after forwarding the note.
If you lost money through a scam (either personal or business-related money), you can report it to the Treasury Inspector General Administration (TIGTA).
You can also file a complaint to the Federal Trade Commission. The IRS takes scams very seriously. Their website has more information about reporting tax scams that affect your small business.