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How to Avoid Tax Fraud Scams

  • March 20, 2019
How to Avoid Tax Fraud Scams

It’s tax season, which also means that scammers who commit tax fraud are trying to beat the system. Tax refund fraud and identity theft are the most common types of tax scams. In 2016, the IRS “rejected or suspended the processing of 4.8 million suspicious returns,” halting 1.4 million cases of identity theft returns which totaled $8 billion, and $2.9 billion in other types of fraud.

And this year, after the backlog the IRS is experiencing thanks to the government shutdown, experts are worried that there may be more cases of IRS fraud than ever before. In fact, in December, before the shutdown occurred, the IRS issued a warning for small businesses and individuals to be extra cautious about tax fraud this year, as scammers can steal social security numbers in order to steal tax refunds.

Although many people may have already filed their taxes at this point, these tips for how to avoid tax fraud scams can be applied toward next year’s taxes as well.

Safeguard Yourself From Tax Scams

Many people don’t even realize that they’ve been the victim of a tax fraud scheme until it’s too late: they try to file their taxes and find that they cannot because someone has already filed taxes using their social security number—and gotten a refund as a result. It can feel deeply violating to know that someone stole your personal information in order to turn a profit. If you had a plan to do something with your tax refund—like pay off debt, or buy a new refrigerator—being the victim of IRS fraud can be devastating.

While you can’t completely safeguard against identity theft, you can take steps to significantly decrease your chances of being targeted by scammers. Here is some of the best advice we could find on how to avoid tax fraud:

  1. Be Organized, File Early. If you have the ability to file your taxes early, do it. If you beat a scammer to the punch, there’s no way they can file using your personal information. This also means you’ll receive your refund sooner rather than later!

  2. Lower Your Refund By Adjusting Withholding. If you’re still working, you can opt to lower the amount of money that gets taken out of your paycheck and put towards your taxes. This way, you won’t have to depend so heavily on a refund come tax time, and you’ll see an increase in your paychecks throughout the year.

  3. Change Your Passwords Frequently. This is a great rule of thumb to follow for any sensitive information you might keep online. Create complex passwords that have a mix of letters and numbers (and try to steer clear of using obvious things, like birthdays or names of loved ones), and be sure to update them every 6 months.

  4. Invest In Cybersecurity. Programs that not only maintain your cybersecurity but also monitor your online activity, like Lifelock, can keep you posted on suspicious online activity in real time. With all these big corporate security breaches being reported in the news, a cybersecurity program will keep you alert to whether or not your social security or credit card information is floating around on the dark web for hackers to buy.

  5. Know What’s Normal (And What’s Not). An example of what’s not normal: the IRS will never call you. The IRS fraud scam has been going on for years--someone calls your phone telling you that you owe the IRS taxes, and then ask you for your social security number or IRS e-file password to “pull up your file.” The truth, however, is that no one from the IRS will ever ask you for this information (they would already have it in your file), and you should never willingly divulge that personal information over the phone.

How To Report Tax Fraud Schemes

If you think that you’ve been victimized by a tax scam, or that someone might have accessed your personal information, you can call the IRS Identity Protection Specialized Unit at 800-908-4490.

If you want to report phone calls that you’ve received, you can contact the office of the Treasury Inspector General.

You can also forward suspicious emails to phishing@irs.gov so that they can investigate potential IRS scams.

Once reported, the process to rectify any wrongdoing after falling victim to tax scams can take up to 6 months, and cost you both time and money. And just because it’s tax season doesn’t mean that there aren’t other scams targeting seniors out there. Educate yourself and your loved ones about how to keep themselves and their bank accounts safe from fraud this year.

ABOUT THE AUTHOR: Hilary Young is a health and wellness expert that specializes in both senior life and caregiving. She'd love to hear more about your thoughts on aging, healthy living, and caregiving, and you can find her on Twitter at @hyoungcreative to start the conversation.


KEYWORDS: IRS fraud, tax scams, tax fraud, tax season