With year-end approaching, and millions of Americans getting their finances in order for their tax obligations to Uncle Sam in 2018, financial fraudsters are lying in wait, hoping for an opportunity to commit tax fraud on unsuspecting financial consumers.
Make no mistake, tax fraud is big business for the financial fraud artists. According to a recent study by the AARP, 80% of survey participants say they are concerned, and half (50%) say they are extremely or very concerned about becoming a target or victim of fraud. Additionally, over one in seven U.S. adults say they have been a victim of identity theft; and 27% have been the victim of a security breach.
How can you identify IRS tax scams and learn how to protect yourself? That’s an achievable task, but it takes being diligent, being properly educated on the various ways tax scams can strike, and taking the necessary action steps to combat IRS tax scams.
The Two Main Types of IRS Tax Fraud
While tax fraud comes in myriad forms, the following primary categories are most likely to result in someone to report tax fraud:
1. Phone Fraud
With phone scams, tax scammers call claiming to be IRS agents and try to get you to part with key personal information, which they’ll use to conduct identity theft.
Here’s how phone-related tax fraud works.
You’ll receive a phone call out of the blue from someone purporting to represent the Internal Revenue Service. According to an IRS consumer alert, the caller is likely to demand cash directly from your bank account or credit card. Or, even more likely, the fraudster will say you have a refund coming and attempt to get you to part with critical personal financial information, like a Social Security number or a bank account number.
In most cases, the scammer will alter his or her caller ID to mirror an actual call from the IRS. They’ll use bogus names and titles and offer to provide equally fraudulent IRS employment I.D. numbers.
Below, the IRS offers some helpful tips and guidance to avoid falling prey to phone fraud:
- The IRS will never call to demand immediate payment, nor will we call about taxes owed without first having mailed you a bill.
- The IRS will never demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
- The IRS will never require you to use a specific payment method for your taxes, such as a prepaid debit card.
- The IRS will never ask for credit or debit card numbers over the phone.
- The IRS will never threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
If you get a phone call from someone claiming to be from the IRS and asking for money, take these action steps:
- Call the IRS immediately at 1-800 829 1040. If there’s a problem with your taxes, an IRS staffer can help you work it out. If there’s no problem, they’ll tell you that, too.
- If you’re certain you don’t owe taxes and don’t have any tax problems, report the phone call scam to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800 366 4484 or at www.tigta.gov.
2. Phishing
Phishing, which the IRS placed among its “dirty dozen” tax fraud schemes, happens when taxpayers receive bogus emails that try to link them through to phony IRS websites. The reality is different — and dangerous, as phishing emails generated from fraudsters are designed specifically to swipe your personal data. IRS phishing scams can also include attachments to emails that embed toxic codes and can either breach or damage your laptop, e-reader, or other digital device.