The fact is that there are scammers galore out there. They can seem innocent at first, but they’re playing on your emotions from the start. Before long, they’ll try to sucker you into giving up your personal information and money.
They might pose as long-lost relatives or call about pretend problems with your internet connection or computer or phone operating system. Some of the most common scams involve people pretending to be from the Internal Revenue Service (IRS) threatening arrest if you don’t comply with their requests. Here’s how they work—and how not to become their next victim.
- Thousands of people fall prey to IRS scams each year, losing millions of dollars in the process.
- IRS scammers try to scare people into providing sensitive information or money, sometimes threatening arrest, deportation, or other harm.
- While phone scams are most common, scammers also use email, text messages, postal mail, and other means.
- If you think you may have been contacted by a scammer, report the suspicious call or correspondence to the IRS.
How IRS Tax Scams Work
Authorities say thousands of people—from everyday citizens to sophisticated professionals—fall prey to IRS and other imposter scams each year, losing millions of dollars in the process. According to a Federal Trade Commission (FTC) report, one out of five Americans reporting imposter fraud lost money to scammers, with median individual losses of around $850. In total, imposter scams cost Americans some $1,190 million in 2020—and those were just the cases reported to authorities. Many victims never file reports, often out of embarrassment.
Imposter scams aren’t the only way criminals can steal your personal information, of course. Your information is stored in many places: on printed documents, on your computer, on your smartphone, in the cloud, with your employer, with your doctor, with your financial service providers, with your tax preparer, and with the IRS. Within this data—especially your tax returns—is valuable personal information such as your Social Security number (SSN), address, phone number, profession, marital status, and how much money you make, all information that can be used to impersonate or intimidate you.
While you can’t prevent all types of tax-related fraud, you can take steps to reduce your risk.
The IRS’s ‘Dirty Dozen’ Tax Scams
The IRS publishes an annual list of what it calls the “dirty dozen”—some of the most common tax scams currently circulating. In 2021 new scams emerged to take advantage of coronavirus tax relief. The IRS cautions taxpayers to be especially vigilant about the following 12 scams.
- Economic impact payment theft – Criminals have tried to steal people’s stimulus payments through fraudulent text messages, calls, and emails, as well as by swiping checks from mailboxes. In addition, some nursing homes and care facilities have tried to steal CARES Act stimulus payments from their Medicaid patients.
- Unemployment fraud – Thieves have claimed state unemployment compensation by stealing taxpayers’ personal information. You might not realize you’ve been a victim until the IRS sends you a Form 1099-G stating that you received unemployment pay that you need to report on your tax return—when you never actually received that pay.
- Phishing – When emails, websites, text messages, or social media pretend to be from the IRS to entice people, businesses, and tax professionals to divulge personal or financial information, that’s a form of phishing. Do not click on links or download attachments included with any such communication.
- Threatening phone calls – Criminals posing as IRS agents threaten people with arrest, deportation, license revocation, or Social Security number cancellation if they don’t make an immediate payment.
- Social media scams – Scammers impersonate you to go after your friends and family or impersonate your friends and family to go after you.
- Ransomware – This malicious software infects the victim’s computer, then makes its data inaccessible. The scammer demands payment to restore access to locked files. This scam often targets businesses and institutions, so it’s important to be alert to potential fraud at work as well as at home.
- Phony charities – Fake charities, often with names similar to real charities, might ask you for money, gift card numbers, or personal financial information.
- Fraud vs. older people and immigrants – Many frauds listed here tend to target older people and immigrants more than other groups. Seemingly trustworthy professional and personal relationships can be an entry point, especially when no one appears to be looking out for the target. The fourth scam listed above—threatening phone calls—is a heightened risk to individuals who have limited or no English skills and may have poor access to information meant to warn them about such scams.
- Tax-debt–resolution mills – These outfits charge you money under the pretense that they can get you an offer in compromise to settle your tax debt with the IRS for pennies on the dollar.
- Dishonest tax preparers – An unscrupulous tax preparer can steal your personal information. In addition, be alert for “ghost preparers.” They’ll convince you to pay them for tax preparation by promising inflated refunds. However, they won’t sign your return, and they won’t have a valid preparer tax identification number (PTIN). If caught, you may face fraud charges.
- Unemployment insurance scams – Criminals work alongside, or against, employers and financial institutions to extract fraudulent payments from state and local agencies.
- Abusive agreements – Unscrupulous promoters promise that filers can claim big tax deductions by participating in complex schemes. They charge taxpayers to participate in these schemes and leave their clients on the hook for fraudulent underpayment of taxes. A good rule of thumb is that if it sounds too good to be true, it very likely is.
Let’s look at how IRS scammers contact people in more detail.
Scammers carry out the majority of their schemes by phone and are often aggressive. They try to convince potential victims that they are legitimate IRS employees by spoofing caller ID information, using fake or even real IRS employee badge numbers, and having key information about their targets.
Scam callers may try to persuade their targets to send them immediate payment through a preloaded debit card or gift card or via a wire transfer—which can be hard to trace. Even if you discover you’ve been scammed, recovering your money is virtually impossible.
At the end of June 2021 the IRS reported an overall decrease in the number of phone scams from criminals claiming to be IRS employees from 2019 to 2020. At the same time, federal tax lien phone scams increased 79%, from 58 to 104. The IRS reminds taxpayers that it usually makes its first contact by mail, not by phone.
Email scams are another major threat. You might receive an email that appears legitimate because the scammer has appropriated the IRS logo or an actual tax software company’s logo. The email may claim to be about your refund, return status, or tax account.
Links in the email may direct you to websites that look legitimate but are actually operated by scammers who want to steal your information and claim fraudulent tax refunds in your name. These sites may also contain malware that gives criminals access to your files or tracks your keystrokes without your knowledge to steal your website logins and passwords. The IRS cautions taxpayers that it does not initiate contact by email to request personal or financial information.
Signs That You May Be a Victim
Aside from realizing after the fact that you gave your credit card number or other information to someone posing as an IRS agent, the following signs—explained by tax preparer Abby Eisenkraft in tax fraud seminars 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 to claim a fraudulent refund.
- You receive a letter from the IRS. A letter that asks whether you filed a tax return could indicate that someone else has attempted to file using your information, and the IRS is suspicious.
- You receive a W-2 or 1099 from an employer you have not worked for. To see if it’s legitimate, Google the company’s name. Sometimes the name you know the company by is different from its official name on tax documents.
- You receive a tax refund you didn't file for. While the IRS does issue refunds if it catches an overpayment error on your tax return (yes, really), you can expect to receive a letter of explanation first.
- 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.
Anyone can now apply for an identity protection PIN (IP PIN) from the IRS. An IP PIN could help protect you against scammers filing returns using your information.
What to Do if a Possible Scammer Contacts You
If you receive any communication that claims to be from the IRS, here’s what you should do.
Any email that says it is from the IRS is 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.
The IRS does not send text messages. If you receive a text message that claims to be from the IRS, it’s a scam. Do 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.
Do not assume that a phone caller claiming to be from the IRS is legitimate, even if your caller ID shows a Washington, D.C., area code or says “Internal Revenue Service.” These details can be spoofed.
Don’t give the caller any information. Say you cannot talk at the moment and will call back shortly. Do not ask for a phone number; instead, ask for the caller’s name and badge number. Hang up, then immediately report the call to the Treasury Inspector General for Tax Administration. Also email firstname.lastname@example.org using the subject line “IRS Phone Scam.”
The IRS will never call you to threaten arrest, nor will it send the local police to arrest you. There are cases where federal officers arrest people for tax fraud, but these arrests don’t occur out of the blue. Ordinary citizens who have simply made a mistake on their tax returns are not at risk of going to jail over unpaid taxes.
Even though the IRS does communicate by letter, a letter that seems to be from the IRS may not be legitimate. Scammers can send fake IRS notices by mail, and they can be challenging to authenticate.
Be suspicious if the letter asks for money. A letter asking you to make out a check to the IRS is a scam; a real payment to the IRS must be made out to “United States Treasury.”
Scammers will instruct you to send payment immediately and dispute it later, even if you disagree with the amount of the notice. The real IRS allows taxpayers to dispute claims first and pay after an agreement is reached.
Rather than immediately assuming that an IRS letter requesting payment or personal information is real or fake, go to IRS.gov and search for the relevant notice or form number. Also, read the IRS page titled “Understanding Your IRS Notice or Letter.” You can even call the IRS directly to inquire about a letter’s legitimacy. Find the correct phone number in the help section of IRS.gov.
How Does the IRS Communicate With Taxpayers?
The IRS will generally reach out initially by letter. It does not make phone calls out of the blue, and it does not use email or text messages to communicate with taxpayers.
What if I’m Threatened if I Don’t Immediately Pay?
The IRS never asks for payment up front. All taxpayers are allowed to dispute its judgments before paying, with financial settlement only occurring after an agreement is reached between the IRS and the taxpayer. If you are asked for immediate payment or else, it’s a scam.
What Is Phishing?
Phishing is an attempt to get personal and financial information from someone by email or text or through websites or on social media. Emails, texts, and social media posts can have links that take you to phony websites that look legitimate but aren’t, from which scammers can access your info and put malicious software on your computer or phone. Never click on unsolicited links in any form of digital communication. Also, never download an attachment whose source is unknown to you. Once you do either, it’s generally too late.
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—ranging from hacking and phishing to social engineering. Your odds of becoming a victim will go down if you’re aware of the scams and how they work. Never provide information in response to an unsolicited phone call or email, for example.
New scams emerge all the time, so listen to your gut if anything seems 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’re concerned. The IRS and other agencies rely on you to bring these scams to their attention. If you make a report today, you may be helping someone else down the road.