Tax Scams You Must Watch Out For

Last updated on October 13, 2023

Some tax scams are short-lived and occur only during tax season, but some of tax scams such as identity theft occur throughout the year. The IRS issues yearly warning about tax scams through their IRS Dirty Dozen tax scams to help taxpayers stay aware of the current tax scams. The top tax scams that taxpayers must protect themselves against as shared by The Daily Herald are:

“Identity theft — Theft of federal tax refunds climbed 400 percent from 2011-13. Cyberspace isn’t always the scene of the crime: Thieves can steal your mail or rifle through your trash. According to an April 16, 2014, story on money.cnn.com, if you are a victim, the IRS isn’t even obligated to tell you if the crook has been caught.

“Phishing — If you get an unsolicited email claiming to be from the IRS or the Electronic Federal Tax Payment System , it is a scam. Neither agency emails taxpayers out of the blue seeking information. If such an email lands in your inbox, the IRS suggests you forward it to phishing@irs.gov.

“Phone shakedowns — Each year, criminals call taxpayers and allege that they owe the IRS money, which must be paid quickly via wire transfer or a pre-loaded debit card. Visual and aural tricks can lend authenticity to the ruse: The caller ID may show a toll-free number and background noise may suggest a call center. The caller may know the last four digits of your social security number, or mention a phony IRS employee badge number. After the initial call, there may be a follow-up call or email from the ‘Department of Motor Vehicles’ or the ‘police’. Such behavior can be reported to the Treasury Inspector General for Tax Administration at (800) 366-4484.

“Sham tax preparation services — While there are many good, legitimate small businesses providing tax preparation, there are also some con artists out there who aim to rip off social security numbers and personal information and grab phantom refunds. Worth noting, as always: You are legally responsible for what’s on your 1040 form, even if a third party prepares it.

“Phony income, expenses and exemptions — Some taxpayers exaggerate or falsify incomes in pursuit of the Earned Income Tax Credit, the fuel tax credit and other big federal tax perks. A fraudulent claim for the fuel tax credit can backfire into a penalty of as much as $5,000. Once caught, taxpayers may be on the hook for repaying the credit and refund amounts with interest and penalties, and may face criminal prosecution.”