Personal Finance

These scams may cost you this tax season. Here's what to do if you are a victim

Key Points
  • The tax season started Jan. 24 and runs to April 18 for most people.
  • The IRS is warning of a likely increase in scams during this time.
  • Criminals often try impersonating IRS agents via text, e-mail and phone calls. Their goal is to steal money or sensitive personal information.
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Tax season is underway — and the IRS is warning of a likely increase in scams targeting taxpayers.

Agency officials are sounding the alarm on "IRS impersonation scams," in which criminals pose as IRS agents to try stealing money or personal information. The latter can lead to identity theft — which allows crooks to file tax returns in victims' names and steal their tax refund, in addition to other negative financial effects.

Common frauds this tax season may include text-message scams, e-mail schemes, phone scams and unemployment fraud, according to an IRS bulletin issued Thursday.

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These cons can happen throughout the year, but tax season is an especially ripe time for fraudsters.

"With filing season underway, this is a prime period for identity thieves to hit people with realistic-looking emails and texts about their tax returns and refunds," IRS Commissioner Chuck Rettig said in the memo.

Here are some common scams to watch for.

1. Text message scams

Text hoaxes involve messages with bogus links that claims to be IRS websites or other online tools. Last year, for example, there was an increase in texts referencing Covid-19 and stimulus payments.

The IRS doesn't use texts (or social media platforms) to discuss personal tax issues, such as bills or refunds.

"The IRS reminds everyone NOT to click links or open attachments in unsolicited, suspicious or unexpected text messages — whether from the IRS, state tax agencies or others in the tax community," according to the agency bulletin.

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2. E-mail hoaxes

E-mail schemes are similar — they involve victims getting an unsolicited message appearing to be from the IRS or a program closely linked to the agency. However, the IRS doesn't use email to request personal or financial information.

The tax bureau initiates most contacts via regular mail delivered by the U.S. Postal Service.

(The IRS will call or come to a home or business in some circumstances, such as when a taxpayer has an overdue tax bill or delinquent tax return. But they'll generally first receive several letters from the IRS in the mail.)

3. Phone scams

Criminals generally leave pre-recorded, urgent messages requesting a call back, and threaten victims with an arrest warrant, deportation or revocation of licenses if they don't.

Thieves can mask the true caller ID number to make it seem like an IRS office, local sheriff's office, state department of motor vehicles or other federal agency is calling.

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Callers may be requesting payment for an owed tax bill. However, the IRS will generally first mail a bill to taxpayers, according to the agency. And all tax payments should never be made payable to third parties — only to the U.S. Department of the Treasury.

The IRS will never ask for credit or debit card numbers over the phone, or demand immediate payment using a specific payment method like prepaid debit card, gift card or wire transfer. The agency also lets taxpayers question or appeal the owed amount.

Individuals who think they may owe a bill can examine the balance in their online account.

4. Unemployment fraud

There's been an uptick in unemployment fraud during the pandemic. Organized crime rings and other thieves use stolen personal data to file fraudulent unemployment claims in victims' names.

Victims may only discover the identity theft at tax time, when they receive a 1099-G tax form detailing unemployment compensation they never collected. Unemployment benefits are taxable income at the federal level, and in most states.

Workers who get an inaccurate 1099-G should report it to the issuing state agency and request a corrected Form 1099-G.

What steps to take?

Taxpayers may only discover an identity theft when filing a tax return electronically and finding a return has already been filed with their Social Security Number. The IRS may also send a letter about a suspicious return filed with their SSN.

The IRS recommends a few steps:

  • Respond immediately to any IRS notice in the mail. Call the number provided.
  • Continue to pay taxes and file your tax return, even if you must do so by paper. (Note: A paper return will likely delay processing and refunds.)
  • Complete IRS Form 14039, Identity Theft Affidavit, if an e-filed tax return is rejected because of a duplicate filing under their SSN or if instructed to do so by the IRS. Print and attach the form to a paper return and mail according to instructions.
  • Those who'd previously contacted the IRS about tax-related identity theft but didn't have a resolution should call 1-800-908-4490 for specialized assistance.

Identity-theft victims should also consider:

  • Checking a credit report for suspicious activity or unauthorized lines of credit. You can request a free credit report every week through AnnualCreditReport.com or call 1- 877-322-8228.
  • Freezing credit to protect against new accounts being opened in their name.