Tax-filing season is upon us, but the Internal Revenue Service (IRS) warns that consumers should expect a variety of challenges and delays due to a combination of severe staffing shortages, chronic budget shortfalls and a backlog of millions of unprocessed tax returns from previous years.
In other words, it’s like Christmas for cybercriminals.
Each spring, scam artists launch their annual surge of illicit emails, phone calls and text messages designed to steal money or information. Last year alone, some 59 million Americans were duped by scammers impersonating IRS agents, other government employees or debt collectors. Given the operational challenges faced by a resource-strapped IRS, malicious actors are likely to redouble their efforts this year.
Taxpayers should be on the look out for these nine types of fraudulent activity in coming weeks:
- Phishing emails. Emails purportedly from the IRS demanding payment of a tax bill or requesting personal or financial information are the most common scams. Typically, these emails will include a link to a spoofed IRS website designed to get users to enter personal information or submit payments.Tax professionals are also targeted with requests to update information on fake IRS websites
- Text message scams. Messages referencing the pandemic or stimulus payments may also contain bogus links to purported IRS sites. Clicking on these links can expose users to automatically downloaded malware.
- Threatening phone calls. Phone calls or voice mails threatening arrest and prosecution over delinquent tax bills are almost certainly scams. Other phone scams take a softer approach and try to get you to verify personal information.
- Gift card payments. Whether by phone, email or text, scammers posing as IRS agents demand payment for tax bills or penalties in giftcards. Once the taxpayer buys the cards, the scammer will ask for the gift card number and PIN.
- Falsified returns. Scammers only need your name, Social Security number and date of birth to file a tax return under your name without your knowledge — typically claiming a large refund. You probably won’t find out about it until you file your taxes and get an alert from the IRS.
- Social Security cancellation threat. In this scam, a criminal threatens to suspend or cancel the victim’s Social Security number if they don’t immediately resolve a tax issue. However, nobody has the authority to suspend, cancel, freeze or revoke your Social Security number.
- Ghost tax preparation. Unscrupulous preparers will charge you to prepare a tax return but decline to sign it before it is filed with the IRS, making it look as if it was self-filed. That leaves them off the hook for any mistakes or fraudulent claims.
- Offer-in-Compromise scam. OICs are a legitimate IRS service that allows taxpayers who meet certain criteria to settle tax debts for less than the full amount. Criminals will offer to assist with the application process for a hefty fee, even if the victim does not meet IRS requirements.
- Unemployment fraud. Scammers may use stolen personal data to fraudulently file for unemployment benefits in your name. You likely won’t discover the identity theft until you receive a 1099-G tax form for unemployment compensation you didn’t receive.
These are just a few of the ways scammers try to exploit our general anxiety about preparing and filing our income taxes. However, there are a few telltale signs of potential fraud. The IRS notes that it will never:
- Initiate contact with taxpayers by email, text messages or social media to request personal or financial information.
- Call to demand immediate payment using a specific payment method such as a prepaid gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
- Threaten to immediately bring in law enforcement groups to have the taxpayer arrested for not paying.
- Demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed.
- Call unexpectedly about a tax refund.
Being aware of the above tactics will help you avoid costly scams.