12 of the Nastiest Tax Scams and How to Prevent Them

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Lets agree on this: Most of what’s written below will NEVER happen to you. Why? Because you are a subscriber to this newsletter and your propensity to consume security related content keeps you current on fraud prevention tactics.

12 of the Nastiest Tax Scams and How to Prevent Them

So, this means you have a responsibility as a security conscious citizen to spread the prevention message below and make sure to specifically inform those in your life who are a bit more vulnerable. K?

Text message tax scams

Text message tax scams are a common form of phishing where scammers impersonate the IRS or other tax authorities to trick victims into revealing personal or financial information. Here’s how these scams typically work:

The scammer sends a text message claiming to be from the IRS, stating that the recipient has an outstanding tax bill, is owed a refund, or needs to verify information. The message often includes a link or phone number to call for more details.

If the victim clicks the link, they are directed to a fake website designed to steal login credentials, credit card numbers, or other sensitive data. If they call the number, they may be asked to provide personal information or make a payment over the phone.

These scam texts aim to create a sense of urgency and fear by threatening consequences like account freezes or legal action if the recipient doesn’t respond quickly. However, the IRS does not initiate contact with taxpayers via text messages, emails, or social media.

Key things to remember:

  • The IRS will never demand immediate payment, threaten arrest, or ask for credit/debit card numbers over the phone.
  • The IRS initiates most contacts through regular mail delivered by the United States Postal Service.
  • Never click on links or call numbers provided in unsolicited texts claiming to be from the IRS.
  • Report suspected tax scams to the IRS by forwarding the text to 202-552-1226.

By being aware of how these scams operate and the IRS’s actual practices, taxpayers can avoid falling victim to text message tax fraud attempts.

Tax scam extortion phone calls

Tax scam extortion phone calls are a common fraudulent tactic where scammers impersonate government agencies like the IRS or law enforcement to trick victims into paying fictitious tax debts or fines. Here’s how these scams typically work:

  • The scammer calls the victim claiming they owe back taxes or penalties to the IRS or other tax authority.
  • They use aggressive tactics like threats of arrest, deportation, or having the police sent to the victim’s home to create a sense of fear and urgency.
  •  The caller demands immediate payment via wire transfer, prepaid debit cards, gift cards, or even cryptocurrencies to resolve the fake tax debt.
  • They often provide a fake case number, badge number, or callback number to appear legitimate.

Key things to remember:

  •  The IRS will never demand immediate payment over the phone, threaten arrest for not paying, or request payment via gift cards or wire transfers.
  • The IRS initiates most contacts through regular mail, not by phone calls.
  • Scammers often spoof caller ID to make it appear the call is from a real IRS or law enforcement number.
  • They may use personal information obtained illegally to make the call seem more credible.

If you receive one of these calls, hang up immediately. Do not provide any personal information or make any payments. Report the call to the Treasury Inspector General for Tax Administration and the Federal Trade Commission.

By recognizing the telltale signs of these extortion scams and knowing the IRS’s actual practices, taxpayers can avoid falling victim to these fraudulent threats and demands for payment.

10 More NASTY Tax Scams

  1. Phishing Scams: Fraudsters often send phishing emails or text messages posing as the Internal Revenue Service (IRS) or tax preparation companies. These messages may claim you owe money or are eligible for a refund, and they typically include a link to a fake website designed to steal your personal and financial information.
  2. Ghost Preparers: Some unscrupulous tax preparers don’t sign the returns they prepare, making it difficult for the IRS to track them down if there are any issues with the return. These “ghost” preparers may also manipulate income figures and claim fake deductions to increase refunds, leaving the taxpayer liable for penalties and interest.
  3. Identity Theft: Identity thieves may use your Social Security number to file a fraudulent tax return and claim a refund in your name. This can delay your legitimate refund and create a mess to untangle with the IRS.
  4. Fake Charities: Scammers often try to take advantage of people’s generosity by setting up fake charities and soliciting donations, especially during tax season when people are looking for deductions.
  5. Inflated Refund Claims: Some unethical tax preparers may promise inflated refunds by claiming credits or deductions you don’t qualify for, leading to potential audits, penalties, and interest charges.
  6. Impersonation Scams: Fraudsters may call or send emails pretending to be IRS agents or other government officials, demanding immediate payment for alleged back taxes or threatening arrest if you don’t comply.
  7. Affinity Fraud: Scammers often target specific communities or groups, exploiting the trust and relationships within those circles to perpetrate tax-related fraud or investment schemes.
  8. Tax Preparer Fraud: Some dishonest tax preparers may alter returns without the taxpayer’s knowledge to claim improper deductions or credits, pocketing a portion of the inflated refund for themselves.
  9. Employment Scams: Unscrupulous employers may pay workers under the table or misclassify them as independent contractors to avoid payroll taxes, leaving employees liable for additional taxes and penalties.
  10. Cryptocurrency Scams: With the rise of cryptocurrency, scammers may try to exploit the relative anonymity and complexity of these transactions to facilitate tax evasion or other fraudulent activities.

To avoid falling victim to these scams, it’s crucial to be vigilant, verify the legitimacy of any communications from the IRS (they ONLY send letters) or tax preparers, and never provide personal or financial information unless you’ve initiated the contact and confirmed the recipient’s authenticity.

Now share this. Please.

Robert Siciliano CSP, CSI, CITRMS is a security expert and private investigator with 30+ years experience, #1 Best Selling Amazon.com author of 5 books, and the architect of the CSI Protection certification; a Cyber Social Identity and Personal Protection security awareness training program. He is a frequent speaker and media commentator, and CEO of Safr.Me and Head Trainer at ProtectNowLLC.com.

The Top 10 Tax Scams of 2024

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1. Phishing Scams: Cybercriminals send fake emails or create fake websites pretending to be from the IRS or tax preparation companies. They often request personal information, such as Social Security numbers or financial details, which they then use for identity theft or fraudulent tax filings.

2. Identity Theft: This scam involves stealing someone’s personal information, such as their Social Security number, to file a tax return and claim a fraudulent refund. Scammers may also use stolen identities to apply for jobs, credit cards, or other benefits.

3. Fake Charities: Scammers set up fake charities or impersonate legitimate organizations to solicit donations from unsuspecting taxpayers. They often use emotional appeals or fake testimonials to trick people into giving money, which they then pocket for themselves.

4. Tax Preparer Fraud: Some tax preparers may engage in fraudulent activities, such as claiming false deductions or credits on their clients’ tax returns to inflate refunds. Taxpayers should be cautious when choosing a tax preparer and ensure they are reputable and trustworthy.

5. Social Security Number Scams: Scammers may call taxpayers claiming to be from the IRS or Social Security Administration and threaten legal action if they do not provide their Social Security number or other personal information. The IRS and SSA will never call taxpayers to demand immediate payment or personal information over the phone.

6. Fake IRS Letters: Scammers send fake letters or notices purportedly from the IRS demanding immediate payment or threatening legal action if the recipient does not comply. These letters often contain grammatical errors or inconsistencies that can help identify them as fraudulent.

7. Tax-Related Identity Theft: This scam involves using stolen personal information to file a tax return and claim a refund before the legitimate taxpayer has a chance to do so. Victims may not realize they are victims until they try to file their own tax return and discover that one has already been filed using their information.

8. Inflated Refund Claims: Some tax preparers may promise taxpayers inflated refunds in exchange for a fee or a percentage of the refund. They may use tactics such as claiming false deductions or credits to artificially inflate the refund amount.

9. Falsifying Income: Taxpayers may attempt to lower their tax liability by underreporting or omitting income from their tax returns. This is illegal and can result in fines, penalties, or criminal prosecution if discovered by the IRS.

10. Abusive Tax Shelters: Some taxpayers may be lured into investing in abusive tax shelters that promise to reduce or eliminate their tax liability. These schemes often involve complex financial transactions or legal structures that are designed to exploit loopholes in the tax code. However, the IRS actively investigates and penalizes taxpayers who participate in abusive tax shelters.

It’s important for taxpayers to remain vigilant and be aware of these scams to avoid becoming victims. They should never provide personal information or payment to anyone claiming to be from the IRS without verifying their identity and legitimacy. Additionally, taxpayers should report any suspected scams or fraudulent activity to the IRS or appropriate authorities.

Here are the top 10 tips to prevent tax-related scams:

1. Be Wary of Suspicious Emails and Phone Calls: The IRS does not initiate contact with taxpayers via email, text messages, or social media channels to request personal or financial information. Be cautious of unsolicited communications claiming to be from the IRS or tax authorities, especially if they ask for sensitive information or demand immediate action.

2. Verify the Identity of Tax Preparers: Before hiring a tax preparer, research their credentials and reputation. Look for certified public accountants (CPAs), enrolled agents, or other professionals with a valid Preparer Tax Identification Number (PTIN). Avoid tax preparers who promise unusually high refunds or charge fees based on a percentage of your refund.

3. Protect Personal Information: Safeguard your Social Security number, financial account numbers, and other sensitive information. Only provide this information to trusted entities when necessary, such as legitimate tax preparers or government agencies. Be cautious when sharing personal information online and use secure methods for transmitting sensitive data.

4. File Early: Filing your tax return early can help prevent tax-related identity theft. By submitting your return before potential scammers, you reduce the risk of someone fraudulently filing a return using your information. Monitor your mailbox for any tax-related documents and file promptly to minimize the window of opportunity for identity thieves.

5. Use Secure Websites for Online Filing: When e-filing your tax return or making electronic payments, ensure you are using a secure and reputable website. Look for “https” in the website URL and a padlock icon in the browser address bar, indicating that the site is encrypted and secure. Avoid using public Wi-Fi networks or unsecured computers for sensitive transactions.

6. Review Your Credit Report Regularly: Monitor your credit report regularly for any suspicious activity or unauthorized accounts. Identity thieves may use stolen personal information to open credit accounts or loans in your name. By reviewing your credit report periodically, you can detect and address any fraudulent activity before it escalates.

7. Be Skeptical of Promises of Large Refunds: Be cautious of tax preparers or schemes that promise unusually large refunds or guaranteed refunds without reviewing your financial information. While legitimate deductions and credits can reduce your tax liability, exaggerated claims or fraudulent tactics may attract unwanted attention from the IRS and lead to penalties or legal consequences.

8. Educate Yourself About Common Scams: Stay informed about common tax-related scams and tactics used by fraudsters. The IRS regularly updates its list of tax scams and issues alerts to warn taxpayers about emerging threats. By familiarizing yourself with these scams, you can recognize warning signs and take proactive steps to protect yourself against fraud.

9. Secure Your Devices and Personal Information: Keep your computer, smartphone, and other devices secure by using up-to-date antivirus software, firewalls, and encryption tools. Enable multi-factor authentication for online accounts and use strong, unique passwords for each account. Avoid clicking on suspicious links or downloading attachments from unknown sources, as they may contain malware or phishing attempts.

10. Report Suspicious Activity: If you encounter a potential tax-related scam or identity theft, report it to the appropriate authorities immediately. Contact the IRS Identity Protection Specialized Unit at 1-800-908-4490 or visit the IRS website for guidance on reporting identity theft and fraudulent activity. Additionally, notify your financial institutions and credit bureaus to protect your accounts and credit information.

By following these tips and remaining vigilant against tax-related scams, you can minimize the risk of falling victim to fraudsters and protect your personal and financial information during tax season and throughout the year. Remember to stay informed, verify the legitimacy of tax-related communications, and take proactive measures to safeguard your identity and assets.

Robert Siciliano CSP, CSI, CITRMS is a security expert and private investigator with 30+ years experience, #1 Best Selling Amazon.com author of 5 books, and the architect of the CSI Protection certification; a Cyber Social Identity and Personal Protection security awareness training program. He is a frequent speaker and media commentator, and CEO of Safr.Me and Head Trainer at ProtectNowLLC.com.