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These 4 Tax Scams Could Really Cost You

March 13, 2019
Income Taxes, Taxes
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Tax scammers are always coming up with new ways to bilk their targets out of information and money. Here are a few tax scams on the IRS’ radar, plus how you can avoid falling prey. For instance, there’s the one where:

1. They call and threaten to arrest you if you don’t pay right now

How it works: Someone claiming to work for the Internal Revenue Service or Social Security Administration calls and says you have a past-due tax bill. If you don’t pay it now, the caller says, you’ll be arrested. “They’re really good at changing that caller ID to make it look legitimate,” says Melissa Szozda Smith, assistant section chief for consumer protection at the Ohio attorney general’s office. And criminals have been changing up their demands over the past year, she notes. “It used to be a lot of wire transfers, and then from the wire transfer request it moved to prepaid money cards. From there it’s transformed more into gift cards. I think people have become more hip to iTunes [cards] being a red flag. [Criminals are] just moving to other types of gift cards.”

How to avoid it: “My first piece of advice is always just to take a minute and relax and think about it,” Smith says. “Does it make sense that the IRS would be doing this? Does it make sense the IRS would be calling you threatening arrest immediately? Or does it make sense the IRS would say that they don’t have access to your Social Security number? Well, probably not.”

2. They target you at work

How it works: Criminals find out who works in human resources, payroll or other jobs that have access to employees’ private information. “The scammer will send a fake email saying, ‘Hey, this is the CEO of the company. Can you please send me all the W-2s so that I can make sure they get distributed appropriately? I need this immediately.’ Of course, the person in HR is just trying to do their job, especially when they’re asked by the boss,” Smith explains.

How to avoid it: Even the best of employees might fall for this scam, so it’s not a bad idea to ask your company what procedures are in place to keep them from accidentally giving away your information. Just asking the question could prompt more security investments and training for employees whom scammers might try to fool, Smith says.

3. They deposit money in your bank account

How it works: Criminals hack into your tax preparer’s system, take your information, file a fake tax return in your name and then put the resulting refund in your bank account. Then they call you, pose as a debt collection agent, tell you the money was deposited in error and tell you to forward the money to their “collection agency.” They may threaten to file charges, have you arrested or “blacklist” your Social Security number if you don’t give the money back.

How to avoid it: There’s little you can do to prevent the first part of this one, but if it happens, report the suspicious activity to the bank and have it return the stolen money to the IRS. Then call your tax preparer right away. If you got a paper check in the mail, don’t cash it — go to the IRS website for instructions.

4. They send bogus emails about your tax bill or refund

How it works: Tax-related phishing scams surged by 60% in 2018, according to the IRS. Scammers send emails with subject lines such as “IRS Important Notice” or “IRS Taxpayer Notice” and which demand payment or warn that the IRS will seize your tax refund unless you click on their link. That link often goes to a fake site or downloads a virus-laden attachment that asks for personal information, which can be used to steal your identity and your money. To add an air of legitimacy, Smith says, the email might even reference passwords or other confidential data about you that was exposed in another data breach and that the criminal later acquired.

How to avoid it: Forward the email to [email protected] The IRS says it doesn’t initiate contact with taxpayers by email to request personal or financial information.

What to do when you encounter a scam

Report it, Smith says.

  • Forward unsolicited emails claiming to be from the IRS to [email protected]
  • Fill out the IRS Impersonation Scam form on the website of the Treasury Inspector General for Tax Administration at www.tigta.gov or call TIGTA at 800-366-4484.
  • File a complaint with the Federal Trade Commission at FTC.gov.
  • Contact your state’s attorney general or other consumer advocacy agency. “If we don’t know that there’s a new twist on a scam, or that a certain scam is happening, it’s really hard for us to get the word out,” Smith says.

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