We are in the midst of tax season, which means you are at higher risk of becoming a victim of scammers. While you are focused on fulfilling your taxpayer responsibilities, others are looking to take advantage of the situation.
To avoid falling victim during the tax season 2024, equip yourself with knowledge of the latest tax scams, their warning signs, and tax experts’ tips on how to stay safe and report them.
- The revenue from tax preparation services in the U.S. is predicted to reach around $8.015,5 million by 2024.
- Tax scams have become more sophisticated. This season, beware of IRS impersonation scams, phishing emails, identity thefts, and fraud related to tax refund advances and tax software.
- To protect yourself, take preventive measures, such as getting an Identity Protection Personal Identification Number (IP PIN) at the beginning of the tax season or using reputable tax software and keeping it up to date.
Here’s how scammers are targeting you this season and what steps you may take.
Latest Tax Scams This Season
If you want to protect yourself, you should know about the latest fraud activities. So, let's take a closer look at the most common tax scams.
Tax identity theft
This is the most rampant tax scam. According to the IRS, over 1 million tax returns in 2023 were flagged for possible identity theft, which happens when someone gains access to your sensitive information and uses it for their own selfish purposes. During tax season, scammers may use it to file returns on your behalf. Then, they proceed to seek tax refunds but provide their bank details for the money to be channeled there.
In a recent TurboTax review #4436425, one taxpayer shared their experience of how “someone filed my taxes under my name.” Fraudsters “changed the bank and phone number” and took their money. As a result, this consumer lost $3,200.
Tax software scams
There are various online tax prep services and software that help taxpayers to file their taxes. The most common ones include TaxAct, TaxSlayer, TurboTax, and H&R Block. Although they are generally easy and convenient to use, consumers report some issues with platforms.
Filing taxes requires you to provide valuable personal and financial information. A breach in the tax filing software means that scammers can get access to this data. While most users trust tax services and the various software companies promise optimal privacy, there have been multiple cases of data breaches.
According to Harrison E. James, attorney at Wisner Baum,
A 2023 U.S. Senate report named H&R Block, as well as TaxAct and TaxSlayer, for recklessly sharing tens of millions of taxpayers’ sensitive personal and financial data with Google and Meta, without users' consent and without disclosing that they were doing so. This is sensitive information about people's income, dependents, alimony, child support, tax deductions, home addresses…
Also, users may encounter difficulties using the platforms and may not receive the customer support they need to complete the filing. For example, one frustrated customer in their TurboTax review #4983667 couldn’t understand why their tax return status didn’t change. And their attempts to get help from customer service failed:
Customer service is basically a canned robo that tells you to call the IRS…I filed a simple tax return March 15, 2023 and it is now August 21, 2023. NO status change on my return from the IRS. It is still "processing”
Email phishing scams
According to Jeff Rose, a certified financial planner, author, and blogger of GoodFinancialCents.com.
Scammers are getting more sophisticated, using emails and texts that look like they're from the IRS or legitimate tax companies. They often create a sense of urgency, like claiming there's a problem with your tax return or refund. And the scary thing is how legit these emails and messages look!
Typically, the emails contain a link or attachment, which is malware or spyware. Once you open the link or attachment, the malware or spyware is installed on your device and scammers can read your personal and financial information.
At the same time, another expert, Max Avery, Capital Markets & Securities Analyst (CMSA) at Syndicately.com, says:
…a newer, more insidious trend involves the use of deepfake technology. Fraudsters can manipulate audio and video to convincingly impersonate tax authorities, making it crucial for taxpayers to verify communication channels meticulously.
IRS impersonation scams
In the case of IRS impersonation scams, scammers pose as IRS agents and call taxpayers. The fraudsters often use fake names and bogus IRS identification badge numbers in an attempt to verify their credibility.
They may then ask you to provide personal and financial information such as your name, social security number, and bank details. Or, they may claim that you owe the IRS or that there is a problem with your tax refunds. They create a sense of urgency and ask that you provide your information or make payments to have the issue resolved.
Also, Ann Martin, Director of Operations of CreditDonkey, warns taxpayers:
Especially this year with the IRS piloting a new free tax filing service in some states, people need to be especially cautious to make sure they're actually getting the real IRS website here. For starters, this free filing service is only available in Alaska, Arizona, California, Florida, Massachusetts, New Hampshire, New York, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming, so if you don't live in one of these states, any free filing offers you get are definitely a scam.
Tax refund advance scams
Tax refund advance scams involve fraudulent offers promising immediate access to tax refunds before tax authorities like the IRS issue them. Scammers may target taxpayers eager to receive tax refunds quickly, especially during tax season.
According to Robert Farrington, a money expert and founder of TheCollegeInvestor.com,
Tax refund advance scams are increasing and taking advantage of consumers who aren’t aware of this tactic. These scams often involve promises of quick cash in exchange for personal and financial information.
7 Red Flags of Tax Scams
Below are 7 red flags to watch for to avoid common tax scams this season:
- Unsolicited emails, texts, or calls from the IRS. Beware that the IRS does not reach out to taxpayers via email, text messages, or phone calls to solicit your information or payments. A financial expert, Jeff Rose, warns,“Consumers need to know the IRS will NEVER reach out to you via email or text to demand a payment. This is a major red flag.”
- Urgency and aggressive tactics. If someone contacts you on behalf of the IRS and threatens legal action, fines, or asks you to make payments immediately, they are likely fraudsters.
- Fake tax filing websites. As Ann Martin notes, “The IRS website actually has a listing of available tax filing sites. If the site you're looking at isn't listed there, this is definitely a red flag.”
- Demands to pay via unusual payment methods. The IRS only accepts the following payment methods: credit cards, debit cards, or a digital wallet through a payment processor.
- Tax refunds or relief promises that are too good to be true. The tax company or relief service cannot guarantee how much the IRS will refund you. As Max Avery recommends, “Be cautious of unexpected refund promises or requests for personal information.” You should “always verify the legitimacy of any communication by directly contacting the official tax agency.”
- Being asked to sign blank or partially filled out tax return forms. Scammers may falsify information or claim undeserved deductions on your behalf, potentially leading to legal and financial consequences. Always check and review tax return forms to ensure all information is accurate.
- Not being given a copy of your returns, if using third-party services. If you are not provided with a copy of documents, it may be considered a red flag as it doesn't allow you to review the information and verify its accuracy. Always insist on getting a copy of your tax returns.
How to Stay Safe While Filing Taxes
Below are some actionable tips to avoid tax scams and secure your personal and financial information during the tax filing process:
- Use only reputable tax software and ensure that it is up to date. Attorney, Harrison E. James, recommends that you, “do your homework so that you know which companies have been named in connection with these kinds of unethical practices.” He then encourages consumersto “check the websites of these companies to see if they’ve installed the Meta Pixel or Google Analytics.” As the expert explains, “If the Meta Pixel or Google Analytics is on the pages that prompt you to input data, I recommend steering clear of that company.”
- Install anti-malware and anti-spyware software and ensure that they are up to date. Also, set up two-step authentication for your email account.
- Request for an Identity Protection Personal Identification Number (IP PIN) from the IRS at the beginning of the tax season. You will be issued with a unique 6-digit number that you provide when filing taxes. If a scammer attempted to file taxes on your behalf, they would not be able to complete the process without the IP PIN.
- If you receive a call from scammers posing as IRS agents, hang up immediately. Do not provide your personal or financial information to anyone, either through the phone, email, or text.
How to Report Tax Scams
To know how to protect your consumer rights is essential for getting positive customer experiences. Speaking about the ways to report tax scams, these are recommended organization to do it:
- IRS website. If you receive spam emails, report them to the IRS by forwarding them to email@example.com. For IRS impersonation calls, submit a complaint on the IRS impersonation scam reporting portal.
- Federal Trade Commission (FTC). Report tax scams through the FTC online complaint assistant at https://reportfraud.ftc.gov/#/.
- File a complaint at your state Attorney General’s office.
During tax season, it is crucial to be cautious and protect yourself from potential scams. By taking the necessary measures and staying informed, you can safeguard your financial resources and sensitive information from tax scammers. In case, you fall victim, report to the relevant authorities such as the IRS, FTC, or your state attorney.
Have you ever fallen victim to tax scams? Share your experience in the comment below or you may leave a review on PissedConsumer.com.
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