Scammers can seem innocent at first, playing on your emotions to get you to talk before they sucker you into giving up your personal information and money. Some pretend to be long-lost relatives, while others call about pretend problems with your internet connection or operating software. Some of the most common scams involve people pretending to be from the Internal Revenue Service, threatening arrest if you don't comply with their requests. Here is 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, imposter scams cost Americans some $667 million in 2019—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 Internal Revenue Service (IRS). Within this data—especially your tax returns—is valuable personal information like 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 you or intimidate you.
While you can’t prevent all types of tax-related fraud, you can take steps to reduce the odds.
The IRS's 'Dirty Dozen' Tax Scams
Each year, the IRS publishes a list of what it calls the "dirty dozen"—some of the most common tax scams currently circulating. In 2020, new scams have emerged to take advantage of coronavirus tax relief. The IRS cautions taxpayers to be especially vigilant about these 12 scams:
- Phishing: Emails and websites pretend to be from the IRS to entice people to divulge personal or financial information.
- Phony charities: Fake charities that often have names similar to real charities make contact with individuals to solicit money or personal financial information.
- 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.
- Economic Impact Payment and tax refund theft: Criminals file false tax returns posing as you to direct illegitimate tax refunds to themselves. In a recent trend, some nursing homes and care facilities have tried to steal CARES Act stimulus payments from patients.
- Fraud vs. older people: Many of the frauds listed here tend to be directed more often at older people than other groups. In addition, older people are targeted through professional and personal relationships, especially when no one appears to be looking out for them.
- Scams targeting non-English speakers: The third 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.
- Dishonest tax preparers: An unscrupulous tax preparer can steal your personal information. Others, called "ghost preparers" will prepare fraudulent returns promising inflated refunds, but they won't sign the return and they don't have a valid Preparer Tax Identification Number (PTIN) to put on it. If caught, the taxpayer may face fraud charges.
- Tax-debt–resolution mills: These outfits charge you money under the false pretense that they can get you an Offer in Compromise to settle your tax debt with the IRS for pennies on the dollar.
- Bogus refunds and repayment demands: The scammer not only uses your information to claim a false refund, but allows it to be deposited into your bank account. Then they call you and pose as an IRS agent demanding that you return the money via gift card to avoid interest and penalties because the refund was made "in error."
- Business email scams: Scammers target companies to seek payment of fake invoices, to steal employees' tax information, or to change employees' direct deposit information and steal their pay.
- Ransomware: This software infects the victim's computer, then makes its data inaccessible. The scammer demands payment to restore access to locked files.
Let's look at how IRS scammers contact people in more detail.
Scammers carry out the majority of their schemes by phone. 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. The IRS calls these scammers aggressive and sophisticated.
Spam callers may try to persuade their targets to send them immediate payment through a preloaded debit card, gift card, or wire transfer—which can be hard to trace. Even if you discover you've been scammed, recovering your money is virtually impossible. Scammers may also ask targets to hold their credit cards up to the camera in their phone or computer in an attempt to get their payment information.
Email scams are another major threat. You receive an email that appears legitimate because the scammer has appropriated the IRS logo or a legitimate tax software company’s logo. The email may claim to be about your refund, filing status, personal information, or e-File PIN.
Links in the email direct you to websites that look legitimate but are actually operated by scammers who want to steal your information so they can 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.
COVID-19 Tax Scams
Criminals have been taking advantage of the pandemic to exploit people. Scams the IRS has identified include these five:
- Fake charities
- Websites selling fake medical supplies
- Offers to invest in companies developing COVID-19 vaccines or treatments
- Theft of Economic Impact Payments
- Phishing emails
Signs 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 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 which you have not worked. To see if it's legitimate, Google the company’s name. It could be that the name you know the company by is different from its official name that appears 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.
What to Do if You're Contacted by a Possible Scammer
If you receive any communication that appears to be from the IRS, here's what you should do.
If the contact is initiated 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.
Do not assume 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 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 the caller's name and badge number. Then contact the Treasury Department directly by calling its fraud hotline: (800) 366-4484. You will be able to find out if the call was legitimate using the information you've obtained. You can also call the IRS directly at (800) 829-1040.
The caller may have provided you with a fake IRS employee name and badge number to try to keep you on the line so you'll give them the information they want. Or, they might just hang up, realizing you're not an easy target. If that happens, you can immediately report the call to the Treasury Inspector General for Tax Administration. Email firstname.lastname@example.org, using the subject line “IRS Phone Scam.”
The IRS will never call you to threaten arrest, nor will they 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.
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.
If the contact is via postal mail, it may or may not be legitimate. Scammers have sent fake IRS notices by mail, but the IRS contacts taxpayers by mail, too. 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. They will also instruct the taxpayer to send payment immediately and dispute it later, even if the taxpayer 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 to inquire about a letter’s legitimacy.
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 through manipulating you, your family, your friends, or your employer. 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 have any concerns. 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 later on.