August 24, 2020

Tax Scams to Watch Out for in 2020


The IRS publishes a list of the most common tax scams each year, but since this year’s tax deadline was delayed, the list of scams was postponed from its usual release earlier in the year. As you may have expected, this year’s list is loaded with COVID-19-related scams to watch out for.

1. Phishing

Fake emails or websites impersonate the IRS in an attempt to steal information about refunds or Economic Impact Payments (EIPs).

How to Avoid Phishing

Remember, the IRS will never initiate contact with taxpayers via email. Be extra wary of any websites and emails making heavy use of COVID-19 terms like stimulus, coronavirus and Economic Impact Payment.

2. Fake Charities

Criminals exploit the fear and uncertainty surrounding the pandemic to set up bogus charities that rob innocent victims who believe they’re helping the unfortunate. The “charity” may even claim to be working on behalf of the IRS to help victims of the virus get their tax refunds.

How to Avoid Fake Charities

Charities with familiar-sounding names that aggressively market themselves are often bogus charities trying to make donors believe they represent the actual well-known organization. They will also refuse to provide an Employer Identification Number (EIN) when asked, and will not have a positive review on sites like Charity.org. Taxpayers can also search for legitimate charities using the IRS charity search tool.

3. Fake IRS Phone Calls

An alleged IRS agent threatens the victim with arrest, deportation, or license revocation if taxes are not paid immediately by prepaid gift card or wire transfer.

How to Protect Yourself from Fake IRS Phone Calls

The IRS will never threaten a taxpayer or demand immediate payment over the phone. It also will not insist on being paid via gift card or wire transfer. If a caller claiming to be the IRS does either of these things, it is almost certainly a scam.

4. Social media scams

Scammers use information that can be found on social media platforms for a variety of scams, including the impersonation of victims’ friends or family members. This ruse often ends in tax-related identity theft.

How to Avoid Social Media Scams

The victim’s “friend” will claim to be in a compromised position and to urgently need the victim’s personal information. When contacted privately, though, the real friend will have no knowledge of the interaction. Always double-check with friends or family members through a reliable contact method (such as calling them on the phone) before providing any money or personal information over social media.

5. EIP or refund theft

Scammers steal taxpayers’ identities, file false tax returns in their names and pocket their refunds and their EIPs.

How to Protect Yourself from EIP or Refund Theft

Personal information should never be shared online with an unverified contact, even if the contact promises to assist in tax filing or receiving the EIP.

6. Senior fraud

Scammers, or long-term caregivers of the elderly, file tax returns on their behalf and then pocket the refunds and EIPs.

How to Guard Against Senior Fraud

Seniors should be wary of bogus emails, text messages and fake websites asking them to share their personal information. If you are unsure whether a contact is really from the IRS, it’s a good idea to independently contact the IRS yourself to verify the request.

7. Scams targeting non-English speakers

Scammers impersonate IRS agents and target non-English speakers, threatening jail time, deportation or revocation of the victim’s driver’s license if an immediate tax payment is not made. The victims have limited access to information and often fall for these scams.

How to Spot an IRS Phone Scams

If you have non-English-speaking family members or friends receiving threatening phone calls from the IRS, it is likely a scam. The IRS will not threaten taxpayers over the phone or insist upon immediate payment.

8. Scam Tax Preparers

Alleged tax preparers will reach out to the victim and offer their services. Unfortunately, though, they will steal the victim’s personal information, file a tax return on their behalf and pocket the refund, or promise inflated refunds for a bigger fee.

How to Avoid Tax Preparation Scams

If a tax preparer is not willing to share their preparer Tax Identification Number (TIN), they are likely to be a scammer. Also, if the alleged preparer promises credits and deductions that sound too good to be true, they probably are.

9. Offer in Compromise Scams

Bogus tax debt resolution companies make false claims about settling tax debts for “pennies on the dollar” through an Offer in Compromise (OIC) in exchange for a steep fee.

How to Avoid Offer in Compromise Scams

An OIC that sounds outrageously attractive is likely bogus. Taxpayers can use the IRS’s OIC tool to see if they qualify for an authentic offer.

10. Fake Payments with Repayment Demands

A scammer steals a taxpayer’s personal information, files a fake tax return on their behalf and has the refund deposited into the taxpayer’s checking account. The scammer then calls the victim impersonating the IRS and claiming the refund was mistakenly inflated, so the victim must return the extra funds via gift card or wire transfer. Of course, this money will go directly into the scammer’s pockets.

How to Protect Yourself from Repayment Demands

Refund checks will never be deposited in a taxpayer’s account if they have not filed taxes. Also, the IRS does not demand payment by a specific method.

11. Payroll and HR Scams

Scams target tax professionals, employers and taxpayers to steal W-2s and other tax information. They will then impersonate the employee and request to change their direct deposit information for their paychecks.

How to Avoid Payroll and HR Scams

If an employer or HR representative receives a request for a direct deposit change, it’s best to check with the employee directly to see if the request is legitimate.

12. Ransomware

Malware infects a victim’s computer, network or server, and tracks keystrokes and/or other computer activity. Sensitive data is then encrypted and locked. When the victim tries to access their data, they’ll receive a pop-up message demanding a ransom payment for the return of their information.

How to Protect Yourself from Ransomware

Links embedded in emails from unverified sources should never be opened. Tax software should not be downloaded unless it features multi-factor authentication.

By staying alert and aware of the most common scam tactics out there, you can better protect yourself and your family from scams. Remember, it never hurts to verify the identity of anyone requesting information or money from you. Always reach out to an official contact number or email address if you are suspicious of the person asking for your information.