How do IRS scammers go about stealing your personal information? Well, they can find it in many places: our unencrypted hard drives and USB drives, the cloud, our employers, our financial service providers, our tax preparers and even the Internal Revenue Service itself. Because income tax returns contain so much valuable personal information, from Social Security numbers to marital status to how much money we make, they are a highly desirable target for hacking by identity thieves. (For more, see 5 Tips to Stay Safe From IRS Tax Scams.)
IRS Scammers and Psychological Manipulation
Scammers also take advantage of people’s deep fear of the IRS to scare them into providing sensitive information or money by phone, email or snail mail. In addition, they can infect computers with malicious software (malware) that lets them access people's files or track their keystrokes via links and attachments in emails or by impersonating tax preparers or tax preparation companies. While you can’t possibly prevent all types of tax-related fraud that might affect you, you can educate yourself about the latest tax scams to make sure you don’t become the victim of a crime you have the power to prevent.
Scammers are carrying out some of their latest schemes by phone. They try to convince callers that they are legitimate IRS employees by spoofing its caller ID information, using fake or even real IRS employee badge numbers and being already being in possession of key information about their targets. The IRS calls these scammers “aggressive and sophisticated.”
Callers try to convince their targets to send them immediate payment through a preloaded debit card, gift card or wire transfer, methods that prevent victims from getting their money back later if they discover they’ve been hornswoggled. Scammers may also ask their targets to hold up their credit cards to the camera in their phones or computers via Skype, ostensibly to get their payment information.
If the target doesn’t pay up, callers may threaten arrest, driver’s license suspension, business license suspension or, in the case of immigrant targets, deportation. Scammers might claim that you haven’t paid a nonexistent federal student tax, penalties related to the Affordable Care Act or back taxes. These scammers are successful enough that they’ve gotten victims to pay up millions of dollars over the last few years.
Email scams are another major threat. You receive an email that appears to be legitimate because the scammer has appropriated the IRS’s logo or a legitimate tax software company’s logo. The email may be about your refund, filing status, personal information or e-File PIN. Links in the email direct you to websites that look legitimate but actually are operated by scammers who want to steal your information in order to claim fraudulent tax refunds. These sites may also contain malware that can give criminals access to your files or track your keystrokes without your knowledge – another way to steal your sensitive data.
What to Do First When the IRS Calls or Writes
Upon receiving any communication that appears to be from the IRS, don’t panic. Here’s what to do, depending on what type of communication you receive.
Email. If the contact is via email, it’s fraudulent. Do not respond to the email, click on any links in it or download any attachments to it. Forward the message to email@example.com, then delete the original email.
Telephone. Similarly, the IRS will never make first contact with you by phone regarding back taxes; the agency will contact you initially by postal mail. However, even if you have already had legitimate contact with the IRS, do not assume that a phone call is the real deal, although the caller ID may have a Washington, D.C., area code (202) or one that says “Internal Revenue Service.” Do not provide the caller with any information. Say you cannot talk at the moment and will call back shortly. Do not ask for a phone number, but do ask for a name and badge number. Then call the IRS directly using the phone number provided on IRS.gov: (800) 366-4484. You will be able to find out if the call was legitimate. (For more, see Tax Scams: The IRS Doesn’t Make Phone Calls.)
If a scammer has called you using a legitimate employee’s name and badge number, the IRS will be able to tell you. And if the caller is obviously a scammer, hang up, immediately report the call to the Treasury Inspector General for Tax Administration and email firstname.lastname@example.org using the subject “IRS Phone Scam.”
It is important to understand that the IRS will not threaten arrest or send the local police to arrest you. While a select few people who intentionally commit tax fraud and evasion by purposefully lying to the IRS, underpaying the tax they owe or failing to file a tax return do eventually end up in jail after repeatedly refusing to cooperate with the IRS, ordinary citizens who have simply made a mistake on their tax returns are not at risk of going to jail over unpaid taxes.
Text message. If the contact is via text message, it’s a scam. As with an email, you should not reply, open any attachments or click on any links in the message. Instead, forward the text to the IRS at (202) 552-1226. If possible, send the IRS a second message with the number from which the fraudulent text originated, then delete the fake IRS text message.
Mail. If the contact is via postal mail, it may or may not be legitimate; scammers have sent fake IRS notices by mail. These notices can be challenging to authenticate, but here are a few clues.
The IRS uses form CP2000 to inform taxpayers of proposed IRS adjustments to their returns. Scammers send out fake CP2000 forms that have an illegitimate IRS address, ask the taxpayer to make the check out to the IRS rather than the United States Treasury (which is how you make out a check to the genuine IRS) and instruct the taxpayer to send payment immediately and dispute it later, even if he or she disagrees with the amount of the notice. The real IRS allows taxpayers to dispute claims of unpaid taxes first and pay after an agreement is reached.
Rather than immediately assuming that an IRS letter requesting payment or personal information is real, go to IRS.gov and search for the relevant notice or form number and read the IRS’s page Understanding Your IRS Notice or Letter. You can also call the IRS directly at (800) 829-1040 to inquire about a letter’s legitimacy.
Signs You May Be a Victim of a Tax Scam
Aside from realizing after the fact that you gave your credit card number or submitted a wire transfer to someone posing as an IRS agent, the following signs, explained by tax preparer Abby Eisenkraft in a recent tax fraud seminar for CPAacademy.org, a knowledge-sharing site for accounting professionals, could indicate that you’ve been the victim of tax-related identity theft.
- Your tax return is rejected when you file it. This could happen if someone has already filed a fake return using your Social Security number in order to claim a fraudulent refund.
- You receive a letter from the IRS that asks whether you sent in a tax return containing your name and Social Security number. This letter could indicate that someone else has attempted to file using your information.
- You receive a W-2 or 1099 from an employer for whom you have not worked. (First, Google the company’s name to make sure that the name you know the company by is different from its official name, which is what appears on tax documents.)
- You receive a tax refund for which you did not file. The IRS is not a gift horse.
- You receive a tax transcript by mail that you did not request. A tax transcript is a document showing most of the line items from your originally filed tax return but not any changes you may have made after you filed the return.
The Bottom Line
Anyone can become a victim of an IRS-related scam because there are so many ways for criminals to steal your personal information without your knowledge. That said, your odds will go down if you’re aware of the scams that criminals can carry out only if you cooperate, such as phone scams that ask for personal information or email scams that download information-stealing malware onto your computer.
As new scams are coming out all the time, listen to your gut if anything seems remotely suspicious. Don’t engage with anyone who reaches out to you about your taxes and always contact the IRS directly by using the information at the official IRS website, IRS.gov, if you have any concerns.