Consumer Handbook: Protecting Yourself from Tax Scams
Welcome to the Consumer Handbook, your weekly guide to navigating the world of smart consumerism. Today, we’re focusing on a particularly relevant topic: avoiding tax scams. With tax season upon us, it’s more important than ever to be vigilant against fraudsters trying to steal your money and your identity.
The Rise of Tax Scams
The IRS is a prime target for scammers, especially during tax season. They exploit the public’s trust in the IRS to steal personal information for tax identity theft or to trick you into direct payment. Let’s look at some of the common tactics used by tax scammers:
How Tax Scammers Operate
- By Phone: Scammers impersonate the IRS and request personal information or payment, claiming you owe back taxes or are due a refund. They might pressure you to act quickly and threaten fines or even arrest if you don’t comply. They may even use fake badge numbers and spoof the caller ID to appear legitimate, often using a Washington, D.C. phone number.
- By Phishing: Scammers send emails, texts, or social media messages pretending to be from the IRS. These messages usually contain a link to a fake IRS website where they ask you to “update your IRS e-file immediately.” This scheme is designed to steal your personal information for fraud.
Once the scammers have your Social Security Number (SSN) or other information, they can file a fraudulent tax return in your name and collect the refund. The consequences can be severe and financially damaging.
Remember: The IRS will NEVER contact you first by email, text, or social media to request your personal or financial information.
Tips to Avoid Tax Identity Theft and Scams
Protecting yourself against tax scams requires a proactive approach. Here are several crucial steps you can take:
- File Early: Filing early reduces the chance a scammer can file a fraudulent return using your identity before you do. Be sure you have all the necessary documents gathered before you begin. The IRS provides a handy checklist to help.
- Consider an Identity Protection PIN (IP PIN): An IP PIN is a six-digit number from the IRS that verifies your identity and can help prevent someone from using your SSN to commit tax fraud. You can obtain an IP PIN from the IRS website and will be sent a new one each December.
- Know How the Real IRS Contacts You: The IRS will NEVER email, text, or contact you on social media to ask for personal or financial information. Communication is usually done by postal mail, but in certain situations, they may call or visit after an initial mailing. If you’re unsure, stop communication and contact the IRS directly.
- Know How Scammers Ask for Payments: The IRS will never demand immediate payment or require a specific kind of payment through the phone. Scammers may tell you to pay with cryptocurrency, wire transfer, or gift cards, which the IRS will never ask for.
- Use Secure Tax Filing Websites: Always ensure you are on the official IRS website or other legitimate tax-filing websites by confirming the URL is spelled correctly, and look for the lock symbol next to the URL to be sure your connection is secure.
- Protect Your Tax Information: Store tax documents securely at home or on a password-protected computer. Avoid giving out your SSN unless absolutely necessary.
- Know the Signs of Fraud: If the IRS informs you that a tax return has already been filed in your name or that you received wages from an employer you don’t know, it’s possible someone has committed tax fraud. Visit the IRS as soon as possible to resolve the problem.
- Report Scams: If you think you’ve encountered a tax scam or identity theft: Report it to the IRS, file a complaint with the FTC, and report it to the BBB’s Scam Tracker.
By staying informed and taking these steps, you can significantly reduce your risk of becoming a victim of tax scams and protect yourself during this crucial time.
