Learn about a few of the most common tax scams in the U.S., watch out for red flags, and know how to protect yourself.
In Canada? See BBB's tips for Canadians.
Tax scams are often as predictable as taxes themselves; they reappear each tax season with a slightly different spin, but the central theme is scammers posing as the Internal Revenue Service (IRS) trying to trick people into paying up or sharing personal information. Here are a few of the most common tax scams and red flags to watch out for:
IRS or CRA impersonation scams
These tax scams may start with a phone call and take two primary forms. In the first version, the IRS "agent" says you owe back taxes and pressures you into paying with a prepaid debit card or wire transfer. If you don’t comply, the scammer threatens you with arrest and fines.
In the other version, scammers claim they are issuing tax refunds and ask you for personal information to send your refund. This information can later be used for identity theft. Scammers also use this approach to target college students by claiming a "federal student tax" has not been paid.
These impostors often go to great lengths to appear real. The scammer may give a fake badge number and name. If it’s a phone scam, your Caller ID may show that the call is coming from Washington, D.C. Con artists sometimes follow up scam calls with an email that uses the IRS logo, colors, and official-sounding language. Often, these scams start with a serious and official-sounding “robocall” recording.
Scammers typically try to push you into action before you have time to think. The IRS will allow you to ask questions or appeal what you owe. Also, their first contact with you will always be by mail, not by phone or email.
Scammers may also demand that payment be made by wire transfer, prepaid debit card, or other non-traditional payment methods because these methods are mainly untraceable and non-reversible. The real IRS and CRA will never demand immediate payment, require a specific form of payment, or ask for a credit card or debit card number over the phone.
The real IRS may call you about outstanding debts after reaching out through a letter in the mail. See BBB's tips on IRS calls to tell if the IRS is calling or if you are talking to a scammer.
Tax identity theft scams
Another tax scam to look out for is tax identity theft. This occurs when a scammer uses your government-issued identity number (Social Security number in the U.S. or Social Insurance number in Canada) to file a tax return in your name and collect your refund. It can also be someone using your information to get a job. Consumers don’t usually realize they have been victims of tax identity theft until they get a written notice from the IRS or CRA saying that more than one tax return was filed or they were paid by an employer they don't know. Learn more about tax ID theft scams.
Email phishing scams
These emails appear to be from the IRS and include a link to a bogus website intended to mirror the official IRS website. These emails state, “You are to update your IRS e-file immediately.” The emails sometimes mention USA.gov and IRSgov (without a dot between "IRS" and "gov"). Don’t get scammed. These emails are not from the IRS.
In a recent BBB Scam Tracker report, a consumer shared an example of a tax email phishing scam. “Received an email telling me that after annual calculations of my fiscal activity I was eligible to receive a tax return of $976.00. At the bottom it recommended using a prepaid card because sending funds does not support this card. Within the email was a link for a Tax Return Form.”
Mailing scams
The IRS warned taxpayers of a new mailing scam that tricks victims into believing they are owed a tax refund. In this scam, taxpayers receive a cardboard envelope from a delivery service, which includes a fake letter from the “IRS” about an unclaimed refund and asks for personal and financial information that scammers could use.
Tips to avoid tax scams
- The best way to avoid tax identity theft is to file your taxes as early as possible. File before a scammer can use your information to file a fake return.
- In the U.S., jot down your Identity Protection PIN (IP PIN) from the IRS before you file your return. This is a six-digit number confirming your identity and your Social Security number. It is important to note that you cannot opt out once you get an IP PIN. So, once you apply, you must provide the IP Pin each year when you file your federal tax returns. The IRS will provide your IP PIN online and then send you a new IP PIN each December by postal mail. Visit the IRS for more information about the program. Read BBB's tips about the IRS PIN.
- Remember that the IRS does not initiate contact with taxpayers by email, text message or social media to request personal or financial information. This includes requests for PIN numbers, passwords or similar access information for credit cards, banks, or other financial accounts.
- Watch for bad grammar and odd punctuation when reading emails and letters claiming to be from the IRS or CRA. If you read awkward or poorly worded sentences, weird capitalization and grammar, or other inaccuracies, this is a sign that the email or letter may be a scam.
- Only deal with trustworthy tax professionals and tax preparation services. For many people, significant life changes, business ownership, or simply a lack of knowledge about the ever-changing tax laws make finding a trustworthy tax preparer a good idea. That said, not all tax preparers have the same level of experience and training. See our tips for finding the right tax preparer for you and always look for the BBB Seal – it’s The Sign of a Better BusinessSM!
- Check out websites carefully and ensure you access the real IRS website when filing your taxes electronically or inquiring for additional information.
- When in doubt, contact the IRS to confirm any contact you receive is legitimate. If you’re unsure whether you’re talking with a scammer, stop communication with the individual and contact the IRS independently. Tell them what the individual has claimed and is asking for, and they should be able to confirm whether you’re talking with the real IRS, CRA, or a scammer.
- If you are the victim of tax identity theft in the U.S., contact the IRS at 1-800-908-4490. You should also file a complaint with the Federal Trade Commission (FTC) at ftc.gov/complaint or by calling 1-877-FTC-HELP. The FTC also offers a personalized identity theft recovery plan at identitytheft.gov.
- If you get tax information delivered electronically from your employer or other entity, treat that information carefully. Download it onto a password-protected computer.
